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Fast 5: CIBIL

Written by CreditSmart

5 Things You Must Know About Your CIBIL Score

When it comes to CIBIL score and Indian cricket team’s performance, almost everyone has an opinion on what will improve performance. However, these opinions at best can be called half-baked (Otherwise, Indian cricket team wouldn’t be getting the frequent beatings that it gets on the field and your CIBIL score wouldn’t be what it is.).

Don’t trust your neighbor, uncle, or newspaper boy to tell you why your credit score reads a dismal reading, and what you can do to improve it; instead sought out experts if you need help.

Here are 5 important facts about CIBIL score, gathered from the best financial experts, to help you become better acquainted with this all important 3-digit score.

You don’t have a credit score because you never applied for it 

Your CIBIL report contains your credit history, like the loans you’ve taken, their status, history or your credit card bills, etc. Your credit score, on the other hand, is a 3-digit numeric summary of your credit history.

If you’ve taken a loan or use a credit, you’d have a credit history. That means you’d also have a credit score. CIBIL credit report and CIBIL credit score—remember, these are two different things—are not something that are created only after you apply for them.

You can go to the CIBIL website and request for a copy of your CIBIL report and score.

Is my credit score affected by credit card payments? If yes, how?

Late payments and defaulting on payment affects your credit score in a negative way, so does high credit card utilization, that is, frequently using your card to its maximum limit or close to it.

How much credit can negatively affect your credit score even if you timely pay your debt installments or EMI of the loans?

Credit score analysis depends on various factors. The two important things related to your borrowing are how much credit you have taken in comparison to your income and what type of credit you’ve taken.

Taking too much credit can negatively affect your credit score even if you make timely payments towards your debt. Too many unsecured loans such as personal loans also affect your credit report in negative way.

I use my credit card for majority of the purchases but make all payments on time. How does it affect my credit score? 

The credit utilization ratio has a strong impact on your score. If you are always closer to maximum credit limit, your credit score will drop. If you are habitual credit card user and have many credit cards, you should use them proportionally to ensure you do max out one or two cards.

My credit score is only useful while taking loans

No, the credit score is used for lots of other things. The credit score allows lenders to know about the financial risk when evaluating your loan application. A higher credit score means the financial risk is lower for the lender and vice versa. The Credit Information Companies Regulation Act (CICRA) allows banks, telecom companies, insurance companies, asset reconstruction companies and broking firms to access your credit score for various reasons. Thus, it can be said your credit score can also be accessed even when you have not applied for a loan.

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