Thursday, 8 September 2016

Get To Know The True Meaning Of CIBIL Score

A CIBIL score is more than a numeric tally of your credit history. Highlighting your credit worthiness to the core, it not only exposes your eligibility for loans and credit cards, it helps you improve your overall financial wellbeing. Thus if you want to enjoy a better life and financial freedom you should always keep a track on your credit rating. Here is a beginner’s guide to understand true meaning of credit score.

What is CIBIL score? The definition-

Ranging from 300 to 900 points, a credit score (popularly known as CIBIL Score) can be defined as a 3 digit numeric calculation that is a part of your Credit Information Report, released by credit Information companies licensed by RBI. CIBIL, Experian, Equifax and Highmark are the four credit bureaus that are eligible to release the credit scores as per the credit history.

The larger is the score, the better is your eligibility for various loans and credit facilities. 900 points is the best score while 300 points is the worst one. A score above 750 points is generally regarded as the good score to make you eligible for approval of credit applications.

What are the benefits of having a good score above 750 points?
There are several benefits of becoming a master of a good credit score. Thus you should always work to enhance credit score and enjoy a better life with available credit. Here is a quick reminder as to why you should have a great score.
1.       Your loan applications are not rejected when you have a good score. You are eligible for auto loan, home loan, education loan, personal loan or credit card of your choice whenever you want.
2.       You get the negotiation power with a good score. A banker always prefers a client that has repaying capabilities. So you can negotiate loan terms and interest factor as per your preference with good score.
3.       Banks tend to offer add on cards and other beneficiaries to their chosen customers. So with a positive credit history and a great score you would get ample benefits along the credit offers.
4.       The benefits of good score doesn’t end at credit approvals only. A lender may even offer you added credit limit on your card itself.
5.       You can also avail a very attractive auto insurance deal with the help of good history on your new car purchase.
However if you have a low score you need not lose the heart as there are some ways to improve credit score fast. Employing these tricks you can soon enjoy all these benefits in future.
1.       A person with low score can easily apply for a secured credit card. This is one of the practical ways to build a good credit history. Your credit limit will increase and your credit utilization would drop too. You can regularly use this card for set monthly expenses and pay off timely before the due date. Following this practice you would build a positive history and within a few months you would be able to see a spike in your score.

2.       Be wary of your credit utilization ratio. You should always make sure that you do not use all of the available limit every month. Even if you pay on time, exhausting whole of the credit limit every month is not recommended. Instead raise the limit and keep the credit ratio below 40 % to establish that you are not credit hungry.

3.       Ensure that there is no late payment or missed repayment ever. You can even automate the payments for the purpose.

4.       Try to get rid of various accounts by consolidating the small loans into an umbrella loan. It would be easier to manage a single account. You might even save on interest factor with a single consolidated loan.

5.       Having a credit history is always better than having no history. Never discard your oldest card. The age of positive credit card is a big boon for you if you want to raise the score. You can however get rid of newer cards with very high interest rates or processing fees. But be mindful of a single factor that by discarding the card, you also shrink your credit limit. And this can affect your credit utilization ratio.

So credit score is one of the important numbers in your credit report and you should always keep a strict check on it.