Doors Will Open With A Good Credit Score, But How To Get There?

As per the guidance and norms of the Reserve Bank of India, any banking or lending institution must check the Credit Information Bureau of India Limited (CIBIL) score of any applicant before the disbursement procedure begins. The credit score of the individual resembles the credit history and its repayment, which becomes extremely important for institutions for risk exposure. At the same time, it has a significant impact on loan applicants as the interest rates applicable on debts and loans are aligned with the CIBIL score.

A slight change in interest rates would have an immense difference in interest payable and depending on the principal loan amount, it ultimately impacts the total repayment made after the maturity period. A high credit rating would ensure lower interest rates are secured for the loan and in contrast, a lower credit score resembles high risk for lenders and higher interest rates are then applied over the loan. Hence, applicants should begin their credit journey with a smaller amount of debt either through credit cards or two-wheeler loans, which would help them with small instalments to be paid periodically. Once the loan amount is repaid with interest on or before the desired tenure, the CIBIL score automatically increases, indicating a strong credit history for the applicant. However, there is always room for uncertainties which can lead one to adversely impact their credit ratings and it takes more time, combined with additional efforts to lift back up the lost credit score levels. Here are some of the best ways one can follow to ensure they maintain a good CIBIL score.

Timely Payments of Minimum Dues

It is recommended to customers by the lender institutions as well as credit card companies to make timely payments for the acquired credits. The most significant aspect of maintaining credit score by the applicant is to ensure they pay the monthly instalments and minimum dues towards their credits on or before the date approaches. Even once if there is a 24-hour delay in making instalment payments would hurt the overall credit ratings. The charges levied for late payments are apart from the adverse impact that is caused by such minor mistakes. However, if for some reason, the applicant is unable to make the timely payment once or twice, there are chances that applicants can regain their ratings, which involves a procedure to connect with the CIBIL ratings through email requesting to make the necessary changes stating the appropriate reasons and repayment history.

Avoid Multiple Debts Simultaneously

There are no limitations for an individual to collect credit as per their requirements, although the important thing is to make sure the credit is repaid wholly. When there are multiple loans and debts taken by an applicant from various sources, it becomes hard for the individual to maintain the fixed monthly expenses and at the same time preserve the total instalments or repayment amount. Moreover, when there are multiple ongoing loans procured by the applicant, the risk exposure for the lending institutions increases, which could end up squashing the loan request. Needless to say, even if a lender agrees to offer a loan, the interest rates for it would be much higher than for a fresh applicant.

Eliminate Credit Card Balance

Credit Card Balance is another aspect that impacts the CIBIL ratings of individuals. The higher credit balance indicates that either the payments made towards the purchases are lower than required or there have been multiple instances of missing payment dates. Similar to multiple loan scenarios, the higher the credit card balance of the applicant, the higher would be the risk for institutions to provide further loans. This would make lenders reluctant for higher loan amounts, causing a decrease in the credit rating of the applicant and they might end up rejecting the loan application.

Appropriate Utilisation of Credit Limit

Credit cards are convenient and smart options for the young generation to initiate their credit journey, which can uplift their ratings for future loans required for education, vehicle purchases, real estate loans or business loans. For credit card users, it becomes very important to maintain their expenses and credit limits as a slight change or missing the minimum due might end up spoiling their credit history. If the individual breaches their credit limit and is unable to make timely payments, it is determined to impact the credit score.

Loan Repayment Tenure

The smart way to make sure one's CIBIL score is maintained in good range, the applicant while applying for debt or loan needs to procure it with longer repayment tenures. This way the instalment burden would be disintegrated according to the long tenures and would become easy for the applicant to make repayment instalments on time. Moreover, the extended tenure also helps in having lower monthly amounts with less impact on savings or disposable income.