The Buyt Desk
For a few credit card users, credit is a horrible experience and for some, it is life-saving. The reason why a few users end up considering it a painstaking liability is they are unable to manage it properly. A mismanaged credit card at first impacts the CIBIL score. And the poor CIBIL score reflects poor credit history. On the other hand, a good score shows users’ financial fitness.
What is CIBIL Score?
The CIBIL score is the score of the customer’s credit. It is three digits numeric summary that show the customer’s credit history as well as the credit profile.
TransUnion CIBIL (Earlier Credit Information Bureau (India) Limited) is the authorized company that collects customer information. The company calculates the score based on details they find in a customer’s Account and Enquiries sections of the CIBIL report. This includes loan account, payment status, outstanding amount and day past the due date. The CIBIL score ranges from 300 to 900. The CIBIL score closer to 900 is excellent. A score ranging between 550 to 700 is considered fair and a score between 300 to 549 is considered poor, a score belonging to the fair and poor category can be made better.
If the CIBIL score is poor, one can improve it following some basics of loan payment method and what goes into the CIBIL Score.
How Is CIBIL Score Calculated?
If you will know the factors that impact your CIBIL score it will help you in maintaining a good score. The five important pieces of information that are used to calculate credit card score are
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The payment history
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Credit mix of secured and unsecured loan
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Enquiries
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Age of credit
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Recent credit
A CIBIL score is calculated based on thirty-six months of credit history.
A good CIBIL score gives you many advantages, such as it helps you saving money on insurance, security deposit on new utilities, cell phone services and much more.
A credit card is a good thing if you are using it with complete responsibility. There are some proven ways to manage CIBIL score, we are listing them here
Keep A Check On Your Credit Utilization Ratio
The credit utilization ratio is the calculation measuring credit usage against the credit limit. This ratio should be 30% to ensure credit score remains stable. To ascertain this, keep your spending lowest possible with the credit card. E.g. If your credit card limit is 25 thousand, then don’t spend the full limit every month, use only 30% of it.
Do Not Cancel The Old Credit Cards
Do not throw away the card just because it’s old. If you will be able to pay bills and maintain the card, your credit card score will get better and better. A better credit score will fetch you numerous advantages in the long run. E.g. your loans will get instant approval, you might receive cards of higher credit limits, etc.
Manage Your Debt
Credit card balances are not the only contributor to CIBIL score. Loans on your name, lines of credit cards you are using and other financial history impact your debt level. Too much debt can cost a bad CIBIL score. Thus, lower your debt to keep your CIBIL score good.
Don’t Be In Rush To Apply For Credit Cards
The widening of the loan market has made too many options available for the loan. But this doesn’t mean that an individual can apply for as many loans as he/she wants. Apply for a loan or card only where there is a necessity. Also, when applying for a loan, check all terms and conditions carefully. Rejected applications negatively affect the credit score. So, before applying for the loan, check eligibility criteria, terms and conditions and other minor details carefully.
Check Your CIBIL Report Regularly
Sometimes it happens that the lender forgets to inform CIBIL about the closure of the loan, especially in the case of a missed payment. There are other factors as well that could ruin your CIBIL score, such as theft or fraud with a credit card, wrong information shared, etc. Regular checking of CIBIL score will bring the matter to light and lets you correct the mistake.
Create A Healthy History Of Credit
If you haven’t taken any loan in the past, then your credit score would be low. To improve your score borrow a healthy mix of credits that includes both secured and unsecured loan of long and short tenure.
Now that you know the factors that influence CIBIL score and how to improve score don’t be scared of loan and credit card, however, take loans and credit card only when it is necessary, and use the facility with complete responsibility.
