Magnificent Mantras to Enhance Your CIBIL Score

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Magnificent Mantras to Enhance Your CIBIL Score

Praveen Sharma
Wednesday, January 23, 2019

Credit scores play an important role for the banks in making a decision while providing credit facilities to you. It determines your creditworthiness and CIBIL is the leading score provider in India. They keep the track of transactions and payment records between individuals and lenders and based on this they create a Credit Information Report (CIR) and credit card score. CIBIL score serves as a tool for the lenders and credit institutions to determine the credibility of the individual and consequently evaluate and approve loans.

As important it is to keep a good credit score, it is equally important to be acquainted with the factors that govern the same. Apart from numerous factors that affect the credit score the payment history plays a vital role here as it acts as a deciding factor and forms approximately 1/3rd of your credit score. The factors affecting your CIBIL score are as follows:

Continue Reading: How to impove cibil score after settlement?

1. Credit repayment history

Probably the most important factor in deciding your CIBIL score. If your repayment history includes timely payments and no defaults on loans and credit card your CIBIL score will be better. It portrays your time-to-time payment habits and banks rely on you. Any missed payment or EMI gets reflected on your payment history which has adverse effects on your CIBIL score.

2. Credit Utilization

If you use your credit limits to the maximum it may appear bad on the CIBIL score and will send a poor image to the bureau. Higher credit utilization reflects your rising debt burden and planned usage of the available credit and less reduction in credit utilization will help improve credit score. Good credit utilization stands at 40% to 50% of your credit limit and you need to maintain it if you are wondering about how to improve your credit score.

3. Credit Mix

A healthy mix of loans and credits reflects the diversity in credit handling and it bears a significant portion of your CIBIL score. A fine mix of secured and unsecured loans also gives the boost to your CIBIL score but lenders are wary of the unsecured loans due to high-interest rates and more chances of defaulters.

4. Credit History

Credit history serves a great deal to the banks and lenders in determining the payment behavior and gathering substantial information necessary to them. The length of credit history also plays an important role. A new credit card holder would not have a credit history and being new banks cannot refer to the score thus they look for other factors. Apart from that having a good credit history for a long time increases the chances of loan approval and it’s a good idea to retain your older credit cards instead of discarding them.

5. Loan Burden

Taking too many loans in a single year, even if you can afford them, will send an adverse image to the CIBIL and other credit bureaus. This reflects your higher debt burden and your vulnerability to get a negative impact on your credit history. Unsecured loans also include personal loans which, on your name, might lower your CIBIL score. It is advisable that you pay down your unsecured loans to keep your CIBIL score healthy.

CIBIL score has become the prime factor in deciding someone’s financial rapport and it can create a huge difference in your loan processing. These simple points might help if you seek knowledge on how to improve cibil score.

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