A credit score is given to you by RBI approved agencies such as CIBIL, based on the financial discipline you follow with the banks and other lending institutions. It basically means that if you have paid your credit card payments on time and are punctual with your EMIs, you will be scored a high credit score. But if you pay your payments late and don’t pay your EMIs on time, it shows that you don’t have financial discipline. A credit score ranges between 300 to 900. Anything between 700 and 900 is considered good, and anything below 550 is considered a bad CIBIL score.
The CIBIL score is formed based on the feedback the lending institutions and the bank have given to the CIBIL agency. The feedback is on whether we pay our credit card payments, EMIs, and loans on time or not.
Following are the ways you can maintain a good CIBIL report:
Pay your credit card payments:
To score a good CIBIL score, you need to get a 700 and above score on the CIBIL report. For that, you have to make sure that you have paid your credit card payments on time and that you have no credit card debt on you. Also, make sure you don’t end up spending more than 30% of the money you have on your credit card. Spending more than that can hurt your credit score.
Paying back your loans:
Paying the interest of your loans on time is very important to have a good CIBIL score. If you pay back your interests on time and clear your loans in a stipulated time frame, your CIBIL score rises. The bank notices how good you are at clearing your loans and informs the agency, which increases your CIBIL score.
Multiple loans and credit cards:
Applying for multiple loans or credit cards in a short time hurts your CIBIL score. Avoid doing that, as your scores will come down. You will often be given an offer of applying for a new credit card but doing so is not a good idea.
The older your card is, the better it will look on the CIBIL report. Unless you have some reason which you cannot avoid, don’t apply for a new credit card. Also, avoid multiple loans as that shows that you are desperate for money, and that will cause problems in your CIBIL report. Instead, go on websites that show multiple options for loans. Here you can see what type of loans or credit cards you are looking for and then apply for it.
In a nutshell, to maintain a good credit score, always make sure your bank dues are fulfilled on time. You should check whether you have paid your credit card debts and loan interests on time. Don’t apply for too many credit cards and multiple loans at one time. This will affect your score. Review your payment dues and credit card debts and pay on time. CIBIL score anything above 700 is considered good, so see that your credit score falls in the bracket of 700 to 900. Check out your CIBIL score on Finserv MARKETS for free.
Pro tip: Set a reminder for the due date of your credit card and try to make the payment at least a week before the due date.