Improve your Credit Score

Credit Information Bureau (India) Ltd; CIBIL is India’s first Credit Information Company, also commonly referred as a Credit Bureau. We collect and maintain records of individuals’ and non-individuals’ (commercial entities) payments pertaining to loans and credit cards. These records are submitted to us by banks and other lenders on a monthly basis; using this information a Credit Information Report (CIR) and Credit Score is developed, enabling lenders to evaluate and approve loan applications. A Credit Bureau is licensed by the RBI and governed by the Credit Information Companies (Regulation) Act of 2005

How to Improve your Credit Score 

You can improve your Credit Score by maintaining a good credit history. This will be viewed favorably by lenders and it can be done with 6 simple rules:

1. Always pay your dues on time
   Late payments are viewed negatively by lenders
    
2. Keep your balances low
   Always prudent to not use too much credit, control your utilization
    
3. Maintain a healthy mix of credit 
   It is better to have a healthy mix of secured (such as home loan, auto loan) and unsecured loans (such as personal loan, credit cards). Too many unsecured loans may be viewed negatively.
    
4. Apply for new credit in moderation
   You don’t want to seem Credit Hungry; apply for new credit cautiously
    
5. Monitor your co-signed, guaranteed and joint accounts monthly 
   In co-signed, guaranteed or jointly held accounts, you are held equally liable for missed payments. Your joint holder’s (or the guaranteed individual) negligence could affect your ability to access credit when you need it
    
6. Review you credit history frequently throughout the year 
   Purchase your CIR from time to time to avoid unpleasant surprises in the form of a rejected loan application

Factor Affecting Credit Score

There are 4 major factors that affect your score

1. Payment history
   Making late payments or defaulting your EMIs or dues (recently or consistently) shows you are having trouble to pay your existing credit obligations and will negatively affect your score.
    
2. High utilization of Credit Limit
   While increased spending on your credit card will not necessarily affect your score in a negative manner, an increase in the current balance of your credit card indicates an increased repayment burden and may negatively affect your score.
    
3. Higher percentage of credit cards or personal loans (also known as unsecured loan)
   Having a balanced mix between the secured loans (such as Auto, Home loan) and unsecured loan (such as Personal loan, Credit Card) is likely to have a more positive affect on your score.
    
4. Many new accounts opened recently
   If you have recently been sanctioned multiple loans and credit cards, then lenders will view your application with caution because this behavior indicates your debt burden has increased increase, which will negatively impact your score.

Apurv Gourav