Getting a financial help in these days is a common issue as one may seek financial hand for different purposes ranging from buying new home to marriage or for any other urgent personal needs.
For getting various kinds of loans like personal loan, home loan, and loan against property , one needs to be eligible in all aspects matching bank’s criteria. The important factor in the determination of a person’s eligibility in the loan approval is CIBIL Score.
Short Introduction of CIBIL Score
To be precise, CIBIL Score is a three digit score of a person, based on the credit history as determined by CIBIL (Credit Information Bureau India Limited). The CIBIL Score which takes into different aspects of the person considering the credit history as provided by the banks, where the person holds accounts and calculating the score based on their algorithm. There are several factors, which plays a pivotal role in the determination of the CIBIL Score of a person.
Decisive Factors for CIBIL Score
Here we are going to discuss, some of those factors, which can prove to be decisive factors in the calculation of CIBIL Score.
1. Credit Cards
The number of Credit cards plays a pivotal role in the calculation of the CIBIL Score of any person. If you think that the number of credit cards can positively or negatively affect your CIBIL Score, then you are absolutely right. One must always remember that applying for credit cards can bring down the CIBIL Score and at the same time, if you decide on bringing down the number of credit cards it can affect the same way. Thus, keep a balance on the number of credit cards you’re using as with the Credit cards, there comes the credit limit and credit utilization ratio, which needs to be taken care off.
2. Prepayment / to Settle Accounts
In case of credit cards , prepayment or premature closure of your exiting loan accounts can in fact improve your CIBIL Score. Thus, never worry on prepayment as it in fact will help you in keeping the credit utilization ratio low. It will actually portray your good repayment track record which will further help you in the improvement of your CIBIL Score to a good extent.
3. Multiple Bank Loan Requests
In case, you more recently applied to multiple banks, your credibility gets under suspicion. However, one must remember that the saving accounts never affect the CIBIL Score.
4. Higher Number of loans
Keep a check on the number of existing loans associated with your name. Keep a tab on such loans and get the loans only when it’s needed.
5. Unsecured Loans
Unsecured loans are again a risky factor which can negatively affect the CIBIL Score of yours. Keep a well maintained balance of the unsecured and secured loans and try to pay off all your EMIs on time.
6. Mix of Credit
A healthy and well maintained mix of credit offers a great credibility before your name. Don’t have a single type of credit associated with you and try to have a balanced mix of different credits.
7. Not using Credit Cards at all
Most often people are of the notion, that Credit cards are a way to the excess expenditure and are not at all beneficial. But have a second thought as Credit Cards can build a healthy CIBIL Score for you as a lack of credit card transaction can reduce the CIBIL Score of yours.
8. Becoming a Guarantor
Becoming a guarantor for someone else can also lead to the negative CIBIL Score of yours in case, the person for whom you’re a guarantor fails to pay off the debt to the lending agency. A failure to pay loan creates a onus on the guarantor and thus it is advised to stay away from becoming a guarantor unless it’s needed.
9. Repayment History
Repayment history matters most for the CIBIL Score and thus one needs to repay all their debts well on time. Everything is being noted and considered when it comes to the calculation of the CIBIL Score by CIBIL and thus one must consider repayment of loans as a liability and should be liable towards it.
10. Number of Credit Inquiries
The higher number of credit inquiries can also prove to a negative factor while in the calculation of the CIBIL Score. The higher number of inquiries for credit, most often lead to an impression that you’re loan hungry. Thus, it is advised that approach bank of your choice and make a loan inquiry of your need.
One needs to check the CIBIL Score consistently as knowing your CIBIL Score can lead you in the better planning for the improvement of it. Upon analyzing all factors involved in the calculation of the CIBIL Score you may tend to find several surprising facts which can lead to CIBIL Score either in the positive way or in the negative way. Always keep in mind that paying your bills on time and following such easy rules can not only increase your CIBIL Score. To improve your CIBIL Score, you need to take some minute but necessary steps.
Every step of yours carries some importance of its own while in the calculation of CIBIL Score and needs to know all factors, which can lead to the better CIBIL Score. Always remember that your credibility lies in your own hands and you are the best person who can leverage from it. Have a proper analysis of your CIBIL Score with the online application for your CIBIL Score at CIBIL Website and start off the process for better CIBIL Score building, which can prove to be crucial in future while applying for loans.