A credit score is a three-digit number unique to every individual which signifies the creditworthiness and the repayment capacity of an individual. The credit score ranges from 300-to 900. A score that is closer to 900 is considered favorable and good by credit lending agencies. CIBIL ™ which is now known as TransUnion CIBIL ™ generates these credit scores for individuals around the globe.
CIBIL ™ was founded in 2000 and now works with around 2400 members which include Non-Banking Financial Institutions, banks and housing finance companies. This credit bureau maintains records of around 550 million people around the world. A good credit score not only maintains a good financial report for an individual but also helps the individual to avail credit easily. Thus it is important to maintain a good score so as to be financially stable and also avail credit in times it is needed the most.
Let us understand ways to maintain a good score and also how to improve the existing score
Late payments are often the main reason why credit scores are impacted. Any late payment for a credit availed can affect the credit score very negatively and impact the financial health of an individual or business. The impact of late or non-payment of any dues is directly seen on the CIBIL™ score. Individuals or businesses can avoid late or non-payment of dues by aligning the payments on auto mode and setting up reminders for these payments. The auto payment mode helps to deduct the dues for every month periodically and thus failure of non-payment is reduced to zero.
Reviewing your score
Reviewing your credit score after every month or for a fixed period of time helps to keep the information for the individuals or businesses updated. Any kind of incorrect information and misrepresentation will affect the score and thus will result in a lower credit score. The details like address or phone number and also business details like the CIN number and the name of directors shall be verified after short intervals to avoid a negative impact on the credit score.
Avoiding Multiple Enquiries
If any individuals or businesses have requested credit from multiple agencies and multiple times, then the credit score gets affected negatively. A frequent application for credit states that the individual or organization is credit hungry and not able to manage the finances. Thus the score will get impacted and will not be up to the mark for availing credit. A simple solution for this case is that the individual or business should apply for credit and should wait for a certain time period for the loan or credit to get approved and then apply for the second or the third time. This will also help the individuals to ascertain the cause for credit denial and wait for the same.
Having a Credit Product
Not having a credit product states that there is no credit history for an individual or a business. For an individual having zero credit products, the credit bureaus cannot assess the risk since there is no past record. Thus, the individual may have to avail of the credit at a very high rate. Thus availing of a minimum of one credit product can help an individual or business to get credit easily and also at a reasonable rate.
Not Exhausting Credit Limits
Exhausting your credit limits will lower the credit scores of individuals or businesses. If the expenses are burdening your credit line that is already existing for an individual or a business, you should request another credit line or increase the limit of the existing credit lines. Closing credit lines or accounts also impacts negatively on the credit score and thus one should avoid closing any accounts as they depict a long term association with the lender or the bank.
Since credit has become an inevitable part of our lives and also plays an important role in the businesses and the industry, we should be careful with maintaining our credit score and thus work towards improving the same. Credit availability will be easy if one focuses on keeping the information updated with credit bureaus, not defaulting on any payments and also having the right credit mix for themselves. The credit score might not be the sole factor for deciding whether credit will be given to an individual or a business but it sure is one of the most important and primary factors which a lender evaluates while providing credit.
FAQS of 5 ways to maintain an excellent CIBIL ™ score
1:Who uses the credit scores provided by credit bureaus?
A lot of people use your credit scores for deciding on various factors in the industry. An example is a lender for giving credit, an employer for checking your history before offering important positions, insurance agents before providing policies, and landlords for deciding whether to let you buy a particular property.
2:Is credit score related to income?
Credit score is not related to any income or investments of individuals or businesses. It is simply related to debt activities and history.
3:What is the ideal credit utilization ratio?
The ideal credit utilization ratio is 30-35%. Most people end up utilizing the whole credit available to them. This can affect the credit score negatively.
4:What is a hard and soft enquiry?
A hard enquiry is one where the lender will evaluate the history of the individual or business. A soft enquiry is one where the individual or business evaluates its own credit history.