CIBIL Score Improvement

Your CIBIL score or credit score is an important factor in determining whether you will be approved for a loan or not. CIBIL scores are generated based on your credit history which includes past credit taken and payment patterns in relation to them. A high score represents strong creditworthiness while a low score indicates low creditworthiness. Low scores will brand you a risky borrower and lenders will be hesitant to approve your loan application.

Maintain your CIBIL Score like a Pro

Doing all things right and still facing problems with keeping your CIBIL score, wondering what you can do more? There are several factors that affect your CIBIL score, not just bad credit behaviour in terms of payments and credit limits etc. Credit choices and their related areas can also affect your score. Some reasons are listed below:

Credit Utilization

When you use the option of credit you should always keep in mind the Credit Utilization Ratio. This ratio is a comparison of the amount of credit you have used to the amount credit you have balance. This ratio amounts to 30% of your actual score. So let’s take an example of Mr. Pandey, who has 5 credit cards, with a total of 10 lakhs of credit limit on all of them, and he decided to close 3 of the 5 cards since he actively used only 2 cards. After she followed the procedure to close the 3 under-utilized cards, his credit limit fell from 10 lakhs to 2.5 lakhs. Mr. Pandey made most of his spending on credit cards and his monthly expenditure would amount to 2 lakhs on his 2 active credit cards, due to his under-utilization of the other 3 cards his credit score drops significantly.

Loan Enquiries

If you want to buy a new car or get a loan to buy your dream home, you would like to check with few banks before you make your decision. Making multiple enquiries can raise a red flag against your name and in turn affecting your score drastically. For every enquiry you make with a financial institution, you enquiry gets recorded, and affects your score making it difficult for the bank to decide to provide you with the credit. Every enquiry brings down your CIBIL score. Let’s take the example of Mr. Pandey who wants to buy a villa in the suburbs of his city, he contacts 5 different banks for a loan of 80 lakhs, to ensure he is getting the best deal. Each of these enquiries have been recorded in CIBIL. With each record of enquiry Mr. Pandey is now eligible only for 65 lakhs, despite having a good repayment history.