Credit Card

28 April 2020

Nothing is worse than having a bad credit score, as it can tarnish your social image. How do I improve my credit score, what are the factors which hit your CIBIL score hard and what should we do to avoid them, are some of the common difficulties, most of the people go through but they lack awareness or ignore it. This ignorance is the cause of the diminishing CIBIL score.    Many people are stuck with a bad credit score due to their poor credit behavior of the borrowers or the lender’s mistakes. Having a good CIBIL score can help you get loans easily.

Below highlighted are some common mistakes which should not be ignored.

A lot of people pay their bills late or skip their payments completely. An ideal way to manage your bills is paying the  minimum balance now and pay the due later. Doing this saves you from late payment fees and diminishing credit score. You need to remember that every time you default on your payments or delay them, the information is updated by your banks and is sent to the CIBIL. This causes your score to look more tarnished. An ideal CIBIL score is to achieve ranges between 300-900 where 300 is on a lower end and 900 is at a higher end.

If your score has not yet hit that mark, then don’t worry it’s never too late to start, begin paying your bills on time, regularly for 1-2 years and then your score will start shooting up.

Also make it a habit of paying your bills a week in advance as the further processing takes time otherwise if you pay them 1 day before the due date the processing time will hamper your creditworthiness.

2. More usage of plastic money:

Earlier using 6-8 credit cards was a status symbol, but now the trends have changed! Usage of more number of credit cards shows that you rely more on credit, and this can have a negative impact on your credit score. It shows that your lifestyle is very much dependent on external credit. For example two people X and Y come to you to borrow money of Rs.5000 each. Prior to this X has also borrowed money from 6 other people of different amounts, but Y hasn’t borrowed any. Now based on this whom will you prefer lending money to? Obviously, Mr. Y because he has no liabilities riding on him and his probability of paying off the loan is also high. The same thing happens in the banking industry, they check your total creditworthiness and the payback period, this information is updated at the CIBIL and accordingly updates your score.

Tip: If you already holding a lot of credit cards, increase the limit of some of them and close the others.

This way you can relieve yourself from paying bills of lot number of credit cards and can enjoy the same limit of credit.

3.   Reaching your Credit Limit every month:

             One of the simplest and an effective way to increase your CIBIL score is not using your card upto its limit. Doing this more often, portrays a negative image of you and will reflect in your credit report. This again shows that you are relying too much on external credit.

Learn to plan your credit card usage. You can prioritize your expenses and decide which are to be borne by cash and which are to be by cash. Using a credit card is not a burden, it’s for your convenience and you need to understand this fact, so using it effectively by deciding on needs arising can definitely help you improve your credit score.

Tip: Practicing this for a couple of months can show progress in your reports.

4.   Don’t take decisions hastily:

              Most of the people do this mistake many a times and suffer later.

For Example: Some random guy walks to you, and tells you that he needs a loan, be my guarantor, what will be your reaction? You will straightaway to refuse to do so. Right?  But sometimes we tend to make this mistake!

 When our friend needs cash and asks us to be a guarantor for a loan he’ll be applying for we commit this mistake. If he fails to pay the loan amount and runs away, naturally the burden will be on your head, and if you also fail to pay that amount it then gets worst. Your credit score gets impacted negatively, because you are unable to pay the due, this information will be updated by Credit Information Bureau India Limited (CIBIL). So take these decisions carefully as it impacts you as well.

5.   Longer the Credit history, better it is:

             The duration of your credit also matters in your credit report. You will naturally trust your friend rather than trusting a stranger, because you know him better than the stranger and since a long time. The same mantra applies here as well. If you pay all your bills on time since a reasonable amount of time then ofcourse it will reflect in your report. So start strong from the beginning itself and remember the longer and reliable your credit history is better it is for you take further loans or credit.

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