10 Things affecting Cibil Score
A credit score is a numeric expression that indicates an individual’s financial health. Credit Information Bureau (India) Limited, commonly known as CIBIL, is India’s first Credit Information Company and has become a synonym for credit score. A CIBIL score provides important information about your credit worthiness to lenders and is used for loan approval.
A CIBIL score ranges between 300 to 900 and any score above 750 is considered to be good. A CIBIL score that is too low can make it difficult for an individual to get a loan or credit card approved.
Here are 10 things that can affect a person’s CIBIL score in India:
- Timeliness of Repayments: Late payments or defaults in payments can have a negative impact on an individual’s credit score. It is important to ensure that all loan repayments are made on time.
- Types of Credit: Too many types of credit can create an impression of greater risk. Too much credit taken from different sources can negatively affect an individual’s CIBIL score.
- Credit Utilization Ratio: Credit utilization ratio is a measure of how much of the available credit limit is being used by an individual. Generally, credit utilization should remain below 40%. Going above this percentage can indicate a greater risk of defaulting.
- Debt Consolidation: It is important to pay off credit card debt before taking out a loan for debt consolidation.
- Closing Credit Card Accounts: It is important to keep existing credit card accounts open to maintain a good CIBIL score.
- Change of Address: Changing address often hampers the CIBIL tracking process and can affect an individual’s credit score.
- Co-signing: Co-signing for a loan or credit card for a friend or family member can also have a negative effect on an individual’s credit score.
- Applying for Too Many Loans: Too many loan applications reflect an individual’s inability to manage finances and can also have a negative impact on their CIBIL score.
- Queries: Too many queries made by lenders in a short space of time can also have a negative impact on an individual’s credit score.
- Cheque Bounce: Cheque bounce or default on payment can have the most severe impact on an individual’s CIBIL score in India.
In conclusion, it is important to understand the impact of these 10 things on a CIBIL score and take appropriate steps to maintain a good credit score.
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