If you are conscious about your
financial health, you are probably aware of the fact that you need to
keep your CIBIL score above the level of 750 in order to access
credit when you need it. Your CIBIL score is a measure of credit
worthiness that banks assess, when you make an application for a loan
or a credit card. Financial wisdom says that you must access your
CIBIL score periodically to check whether it is satisfactory and
whether your credit details have been recorded properly. This must be
done especially 3-6 months before you are planning to get into a
larger financial commitment such as a home loan and are contemplating
making an application for the same.
Even if you do not plan to access
credit in the near term, it is a good practice to keep a tab on your
CIBIL score, just to ensure that things are in order. Sometimes if
you check your CIBIL score in quick succession, you may find that
your CIBIL score has altered within a short span of time, even though
you have not made any large change in your financial habits. If this
perplexes you, and you are in a bid to find out what makes your CIBIL
score change, you are in the right place, for we are here to tell you
just that! Your CIBIL score is not a just a three digit statistical
figure that remains constant, but is dynamic in nature and keeps
changing based on your credit behaviour.
What impacts your CIBIL score?
But before we delve into further
details, let us tell you about some factors that impact your CIBIL
score. Certain factors such as how much is your total outstanding
credit card debt, how you handle repayments on your credit card, the
total length of your credit, how much of your total credit you have
utilized, how often in the recent past have you applied for loans and
credit cards, and how regularly you have been making repayments on
your loans, are the major factors that impact your CIBIL score. Now
some of these factors have a short term effect, while certain other
factors have a far reaching impact.
For instance, if you have been
scouting for credit cards or a loan in the recent past and made a few
applications in order to get the best deal, this information is
recorded by CIBIL as “hard inquiries”. Each time a hard inquiry
is recorded your CIBIL score goes down a few notches. So if you have
checked your credit score in the previous month and happen to find
that your score has gone down within a span of 15-30 days even though
you have not changed the re-payment pattern you follow, do not be
alarmed. It is probably because of the loan or credit card
application you have made in the recent past.
All you have to do to increase
your credit score, is continue to make regular repayments of your
outstanding credit card debt and meet other credit commitments and
you will be able to improve your CIBIL score shortly. However, do not
make a habit of seeking out credit much too often, as that portrays
you as “credit hungry” to a prospective lender and also keeps
your CIBIL score low on account of too many hard inquiries.
The impact of your credit card
debt
Once you have availed of credit,
you come within the radar of the credit bureaus who keep score of
your credit behavior. CIBIL being the oldest and most recognized
credit bureau in India, the CIBIL score is widely tracked by most
lenders. One major thing that can make your break your CIBIL score,
is how you use your credit card. While on the one hand, it can prove
to be great ammunition to build good credit history, if you use it
judiciously, it can also damage your CIBIL score, if you are reckless
with it.
For example, if you keep
building up your outstanding balance and get into the minimum
repayment cycle every month, it may wreck your CIBIL score and bring
it crashing down. If you are a regular defaulter of payments, your
financial behavior will reflect on your CIBIL score and keep it low.
As a result, you may not have access to credit when in need of it.
Even if you do manage to avail of credit, the rates of interest that
will be imposed on you may be higher than the benchmark, as you will
be perceived as a “risky” customer by the lender in question.
In order to enhance your credit
score, it is important to make timely repayments especially on your
credit card. Also ensure that your loan repayments are on schedule
and your accounts are furnished for timely debit of the stipulated
installments each month. Besides, keep track of your CIBIL score and
CIBIL report at least every quarter, to keep a hawk eye on
irregularities or erroneous entries if any. There may be other
serious matters such as incorrect transactions that may show up on
your CIBIL report. These may be indicative of identity theft. In case
there is any such problem, you will need to raise a CIBIL dispute
that will take time to resolve.
Just as you take care of your
physical health, but conducting medical tests every once in a while,
so you must take care of your financial health by maintaining good
credit behavior tracking your CIBIL score. This will not only keep
your CIBIL score high, but will open up doors for you when you are in
the need of credit.
Thank you for sharing such great information.
ReplyDeleteIt is informative, can you help me in finding out more detail on
ideal cibil score for home loan.