A CIBIL™ score is a consumer’s credit score. It is a three-digit numeric summary of a consumer’s credit history and a reflection of a person’s credit profile. This is based on the credit behavior of the consumer in the past, including the borrowing and repayment regularity as shared by banks and lenders with CIBIL™ on a regular basis.

The score is based on the details found in the ‘Accounts and Enquiries ‘ section of the CIBIL™ report and includes loan accounts, credit cards, outstanding amounts, payment statuses and days past the due date.

A person’s past credit history is taken as an indicator of his future actions and in line with that; the CIBIL™ score showcases a consumer’s creditworthiness. When a person applies for a credit card or a loan, one of the important factors that lenders check is the credit profile as stated by the credit score.

TransUnion CIBIL™ is India’s leading credit information company with one of the largest collections of customer information.

What is a CIBIL™ Report?

A CIBIL™ Report is a consolidated credit report that includes a person’s CIBIL™ score and credit summary, personal information, contact information, employment information and information relating to loan accounts including credit cards. It is pertinent to note that lenders assess both a person’s credit score and also the credit report while determining the credit eligibility.

Factors that impact a CIBIL™ score?

The CIBIL™ score is generated by an algorithm, which takes into account a large number of data points and macro-level credit trends. It is primarily based on the past 36 month’s credit history. It considers four key factors that impact a consumer’s CIBIL™ credit score – payment history, credit mix of secured and unsecured loans, enquiries for credit and total credit utilization. The latest credit score, however, also includes the depth of credit, which is the duration of existing credit history, long-term outstanding balances, transaction history on credit cards, the ratio of total repayment to actual amount due and new accounts opened/closed.

How to work toward a positive credit score?

Your CIBIL™ is a reflection of your credit history and past payments but will impact your access to future credit. You can take steps to build a healthier credit score by following these steps:

  • Always be financially disciplined and pay your dues on time.
  • Control your credit utilization and keep your balance payments low.
  • Maintain a healthy mix of secured and unsecured loans as too many unsecured debts like credit cards are viewed negatively.
  • Closely monitor your co-signed, guaranteed or jointly held accounts are you are jointly held liable for any missed payments, which could affect your credit score and the access to credit when you need it.
  • Review your credit history regularly throughout the year. Also monitor your CIBIL™ Score and Report regularly and report any inaccuracies. In case of any inaccuracy, you can raise a dispute on the CIBIL™ website or request the lender to report the correction to CIBIL™.

How to Improve your Credit Score

  1. Set reminders for payments and be credit disciplined

Repayment of outstanding debt can have a significant impact on your credit score. This is why you need to maintain credit discipline by ensuring timely repayment of EMIs. Any delay can affect your credit score adversely.

  1. Maintaining older credit cards to lengthen credit history

If you have old credit cards, you should continue to maintain them as long as possible to help in building a solid and lengthy credit history, which helps in maintaining a good credit score.

  1. Avoid availing too much credit at a time.

If you take multiple loans at once, it will show that you are trapped in a cycle of insufficient funds, which affects your credit score adversely. On the other hand, if you take a loan and repay it successfully it goes a long way in boosting your credit score.

  1. Note your Credit Utilization Ratio

Ensure that you do not utilize your credit card for every transaction. Maintain a total credit utilization ratio of 30%, to see a positive impact on your credit score.

  1. Maintain a low frequency of credit applications

A major reason to avoid making multiple applications for credit is that every time such an application is made the bank will require a credit report from CIBIL™. Such multiple enquiries by the bank will reduce your credit score and also portray you as credit hungry

  1. Avoid settling loans or credit

Settling is a process in which a bank allows a person to settle or close a debt at an amount less than the actual amount of debt. This has an adverse impact on your credit report and may even have a negative impact on the bank’s willingness to offer fresh credit.

  1. Opt for a different type of Credit

Credit, if used carefully, is financially beneficial for a person to build a good credit score. You can improve your credit history and also your CIBIL™ score by taking fewer loans and including a mix of secured and unsecured loans, as well as long-term and short-term loans. Such a variety of loans and their timely repayment will go a long way in improving your CIBIL™ score.

  1. Pay your credit cards on time

The best way to effectively use a credit card is to make timely payments and never come close to your total available credit limit. Another important thing to ensure is that you pay the total amount due on the card or at least a significant amount, but never only the minimum amount due.

  1. Don’t keep applying for credit if rejected

In case you have applied for a loan or a credit card and have been rejected, it will reflect on your credit score. The best way to handle such a situation is to wait for your credit score to improve before making any re-application. more

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