Introduction:
Credit Score indicates a person’s credit history along with their borrowing and repayment habits. It reflects upon the financial status and discipline of the person and is a prerequisite for having any home or car loan approved. In India, credit score is issued by Credit Information Bureau India Limited (CIBIL) and it is also referred to as a CIBIL score. CIBIL can also be referred to as a credit bureau or in other words is a credit information company (CIC).
Good and Bad Score:
It is imperative that one keeps track of their credit score. Checking one’s score is a convenient, user-friendly and a simple online process. The CIBIL TransUnion Score comes with a free credit report and this score can be a three digit number ranging from 300-900. This number reflects the individual’s financial health and stability. A higher score, which is closer to 900, indicates a better chance of securing any loan. However, there is no clear definition of what constitutes a good or a bad score. The CIBIL score has its own terms and conditions of defining a good or a near perfect score.
It is important to have a good CIBIL score and to do that one must practice few healthy financial practices that are discussed below:
Paying Dues on Time:
Time is of essence in improving one’s credit history and having a good score. Paying all the bills before the due date is very critical. Being consistent about each and every payment can help maintain a good score and even improve a bad one.
Low Debt to Credit Ratio:
Credit Score is highly influenced by the ratio of the revolving credit to the actual credit used. This percentage should be very little and ideally this ratio should be 30% or lower.
Maintain Low Balance:
To improve the CIBIL Score it is healthy to keep low balances and pay them regularly. Sometimes the report takes into account the statement balance and the result is a higher ratio. Keep this ratio low by knowing if multiple payments are accepted throughout the month to help maintain low balance.
Eliminate Nuisance Balance:
If a person uses multiple credit cards, they have small balances on each of those cards. To have a good score, one must avoid having too many “functional” cards because that amounts to the fact that more cards means more balance to paid off.
Retain Good Debt Record:
One should not try or pursue the credit company to get rid of old debt on their records. Good debt record is a reflection of a strong credit history and the capability to repay the loan in a timely manner. This is a positive sign and there is no need to remove it from the report.
Avoid Paying Less:
Missing any due payment or paying less than what normally one does is a serious threat for having a good score.
Risk Indication:
Using the card for cash advances or swiping it at places that indicate future monetary crisis can impact the CIBIL score. Also, one should avoid opening random bank accounts and all accounts should be monitored on a monthly basis.
Check the Credit Report:
It is important to keep tab of the score by getting the credit report checked yearly.
Conclusion:
It is important to have a good CIBIL score and the above discussed eight points will help an individual achieve the same.
