CIBIL Score – Few things you need to know
Applying for LOAN :
Did you know all banks check your Credit Score before approving your loan application?Are you planning to go to bank for any kind of Loan (Home, Personal, Car, etc ,etc)
80% of the loans approved are for individuals with a score greater than 750.
What is Credit Score:
A Credit Score, is your detailed credit history and full evidence of your credit worthiness. Based on your credit history, CIBIL gives you a score between 300 and 900. The higher your score, the greater are your chances of loan approval. Before you apply for a Home Loan, Car Loan, Personal Loan or a Credit Card, check your Credit Score.
If you have availed any loan in the past, the credit payment history must have been done on time
There are 4 major factors that affect your Score. These are described below:
1. Late payments or defaults in the recent past: Your payment history has a significant impact on your Score. Hence, if you have missed payments on any of your existing loans, over the last couple of years, your Score is likely to be negatively affected because it indicates that you are having trouble servicing your existing obligations.
2. High Utilization of Credit Limits: While the balances on your loans will only reduce over time as payments are made, you must be diligent about making timely payments on your credit cards. While increased spending on your credit cards may not necessarily negatively affect your Score, an increase in the current balance on the card over time is an indication of an increased repayment burden and may negatively impact your Score. It’s always prudent to not use too much credit.
3. Higher percentage of Credit Cards or Personal Loans (commonly known as Unsecured Loans) on your CIR: A higher concentration of home loans or auto loans (commonly known as Secured Loans) is likely to be more favourable for your Score than a large number of unsecured loans. Although unsecured loans offer easy access to finance, it’s also by far the most expensive forms of credit. More the number of unsecured loans with high utilization, larger are the payments resulting from its high rate of interest.
4. Behaving “Credit Hungry”: If you have made many applications for loans, or have recently been sanctioned new credit facilities, a lender is likely to view your application with caution. This ‘Credit Hungry’ behaviour indicates your debt burden is likely to, or has increased and you are less capable of honouring any additional debt and is likely to negatively impact your Score
SOURCE : http://www.cibil.com
How to Maintain a Good Credit History – Few Basic rules suggest:
– Always pay your bills on time. Late payments are viewed negatively by Loan providers and may affect the chances of your loan getting approved.
– Keep your balances low. While the balances on your loans will only reduce over time as payments are made, you must be diligent about making timely payments on your credit cards. Also, you should control your utilization. For example, if you have used Rs. 90,000 out of a credit limit of Rs. 1,00,000, this may be viewed negatively by a Loan provider. It’s always prudent to not use too much credit.
– Maintain a healthy mix of credit. Your credit history should contain a mix of a home loan, auto loan and a couple of credit cards. A high number of just credit cards may affect the chances of a loan approval. Why is it so, you may wonder. Although a credit card offers easy access to finance, it’s also by far the most expensive form of credit. More the number of credit cards with high utilization, larger are the payments resulting from its high rate of interest.
– Review your credit history frequently throughout the year. Unpleasant surprises in the form of rejected loan applications can be avoided by ensuring that your CREDIT REPORT accurately reflects your current financial status. So reviewing your credit history 3-4 times each year is imperative.
– Apply for new credit in moderation. If you have made many applications for loans, or have recently been sanctioned new credit facilities, a Loan provider is likely to view your application with caution. This ‘Credit Hungry’ behaviour indicates your debt burden is likely to, or has increased and you are less capable of honouring any additional debt.
– Think twice before closing credit card accounts. While, using credit cards may negatively impact your credit history, unused credit cards actually imply that you are financially secure. This makes Loan providers view your application more favourably.
– Monitor your co-signed and joint accounts monthly. In co-signed or jointly held accounts, you are held equally liable for missed payments. This is extremely important because your joint holder’s negligence could affect your ability to access credit when you need it.
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