Why it's important to maintain a good credit score!
Maintaining a good credit score is essential. And, to do so, it's going to require patience and discipline. A poor credit score reduces the chances of getting loans and, if a loan is sanctioned, it is likely to be on unfavourable terms. It is extremely difficult to correct a poor credit score. Moreover, a poor credit score would cause lenders to have serious doubts about the person's credit health.
Here are some facts about maintaining a good credit score, that you need to know:
- Credit information and scores are maintained and calculated by Credit Information Companies (CICs) authorized by the Reserve Bank of India.
- Credit scores are relevant not only when you have an active open line of credit in the form of loans or cards. The credit score of people who do not have any financial liabilities is also calculated. The score takes into account everything that deals with how one manages one's funds.
- Your credit score plays a pivotal role in an individual’s financial journey and provides the first impression for the lender; the higher the score, the better chances of the loan or credit card being approved.”
- A good credit score means quicker and hassle-free approval of loans and credit cards, lower interest rates, easy approval of rented or leased houses, more negotiating power and higher loan limits.
What to watch out for:
- If your credit score is currently bad, you should be extra vigilant and prompt in paying off credit card bills and other utility bills so that the credit report does not show any major defaults.
- Owning too many credit cards shows that the person is hungry for more credit and it lowers his chances of receiving additional credit when actually required. Moreover, using multiple credit cards, makes it difficult for you to track payment due dates and this increases the chances of defaulting.
- Opt for a right mix of secured and unsecured loans as the latter, like personal loans and car loans, generally affect the credit score negatively.Secured loans like home loans, on the other hand, are invested towards asset creation and affect credit score positively.
- When making payments on time or rectifying defaults and delays, ensure your credit card issuer or bank records and reports this to CIBIL. At the same time, one must also avoid applying for too many loans as each time you apply or inquire about loans from a bank, an inquiry is made. When more banks tap in to find out your credit score, it is taken to mean that you are desperate for credit. Whenever an inquiry is made with CIBIL, it reflects on your credit report. The more the number of inquiries, the more your credit score dips
- A good way to improve credit score is to keep inquiries to a minimum and by getting a copy of the score personally. Also, try to approach banks that will lend money at the most affordable rates rather than going to many banks.
For more tips to to help improve your CIBIL score, Click here.
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