How Important Is One’s Credit Score?

Indian loan market has seen a rapid growth in recent years. Gone are the days, when people used to take loans only in times of financial crisis. Declining interest rates and flexibility to repay have made loans an attractive option to fulfil one’s needs today and repay the amount in equal monthly instalments. With this trend, credit scores and credit reports have also gained importance. People are waking up to the fact that scores affect many aspects of their financial life. So many people who have a low CIBIL score are now taking steps to improve and maintain it. They check their free credit score from all the three credit bureaus to keep track of their credit health. But is CIBIL score only a matter of concern to people looking for loan approvals. No, the importance of score goes much beyond that. But before we delve into that lets understand what a credit score is.

Three credit bureaus in India CIBIL, Equifax and Experian compile financial data shared by the member banks and other lending institutes relating to the credit taken by each individual. These bureaus prepare a credit report for each individual, which basically reflects your credit card and other loans repayment history. Based on your credit card usage and repayment track record the bureaus calculate a credit score. The way your marks had determined your level of knowledge in school, in the same way, the credit score determines the risk factor associated with a borrower.

Here are some places where your credit score will be evaluated

Loan approvals- Checking your credit score is one of the first things that lenders do to evaluate whether you are worthy of giving a loan. A high score helps in gaining lender’s trust and assures you of easy approvals. A low CIBIL score indicates that you haven’t dealt with your past debt obligations responsibly, hence lenders feel wary of lending you money. Even credit card approvals and credit limits get affected by your score. Hence a good score comes in handy in obtaining any kind of financial assistance.

Interest rate- An excellent CIBIL score not only helps in getting loan approvals, it also helps in bargaining for a better rate of interest. Lenders are ready to cut down on interest rates if the past records show that you are a diligent and responsible borrower. A low score costs you a lot, as banks charge a high interest rate to cover the risk that they are taking by lending you money. Hence your monthly interest outgo is directly impacted by your credit score.

Employment- Unheard of a few years ago, it is now increasingly becoming a common practice to check the CIBIL score of prospective employees. Credit checks are now an integral part of the hiring process  for jobs in the finance sector, or positions which require a person to handle company’s money. It is basically done to ascertain whether you are responsible in handling money. So if you are looking for a job, check your free credit score to see that your credit profile is in good shape.

Insurance premiums- Whether you are buying a home insurance or a car insurance your score will play an important role in determining the insurance premium that you pay on it. A low score can cost you thousands of rupees more than someone who has an excellent rating.

Renting property- Your CIBIL score can influence the rental opportunities that you have, as many landlords too check your score before letting you out their property. A landlord may not want to take the risk of not getting paid by renting his property to a person with a low CIBIL score. They want to be sure that they get their rent on time, so they prefer renting to a person with good credit who has shown responsible behaviour in the past.

You can order your free credit score from any of the bureaus once every year to monitor your credit situation. An excellent credit rating is anything higher than 750, but even if your score is between the range of 700-750, you can easily qualify for loans and bargain for low interest rates. A score less than 600 is considered as a low CIBIL score. If you fall into this category don’t lose heart. You can still get your financial life back on track if you take conscious efforts and work towards improving CIBIL score.

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4 Different Credit-Scores You Should Know About

The first rating agency in India was established in the year 2000, which makes the history of credit health assessment in India less than two decades old. Since then three more credit rating agencies have been set up in India; thus now there are four different agencies then rate individuals based on their credit behavior and credit history. Although while the basic tenets of rating remain same, there might be few differences in their scoring model and also some other aspects. When you seek a loan, the prospective lender can seek the credit report from any of these four agencies. Thus it is important that one knows the basics that pertain to these different scores that one may have.

What’s in a Name?

The lender can seek the credit report from any of the four rating agencies to judge the credit health of the applicant and scores from all of these are valid. The rating by all agencies is done based on five factors that includes : the repayment history for paying credit card dues and EMIs, hard inquiries made by lenders, credit utilization, credit mix and the length of the credit history. The information supplied to all the agencies by banks and FIs are also same. However, there still might be a minor difference between the scores of all the four agencies due to the weightage that might be given to each parameter which may cause a variation of 5 to 10 points between scores of two different agencies but not more than that.

However, if you follow the basic tenets of being a responsible borrower then you will have a healthy score across agencies and if you want to increase credit score be sure to check what is included in the score calculation. When lenders seek a report from any of these agencies they are aware of the difference in the rating models of each of them and they will keep this in mind when evaluating the CIR of the customer.

As per the RBI guideline, all rating agencies have to provide a free report once a year to all customers who ask for it. The cost of getting the reports (mentioned below) is if you need another report after getting your free one in the same year.

  • TransUnion CIBIL Ltd:

It’s only fair that the first credit rating agency we talk about is TransUnion CIBIL. CIBIL was set up in the year 2000 and was given a license by RBI in the year 2009. TransUnion acquired an 82% stake in CIBIL in 2016 and hence it is now known as TransUnion CIBIL.  The score ranges from 300 to 900.  You can get a report and score by paying Rs. 550; you also could opt to take the option twice or four times in a year or just get the report for Rs. 159. Report is sent in 7 to 10 days; if online verification is successful then you can do a CIBIL score check through email too.

  • Experian Credit Information Co. of India Pvt. Ltd

This rating agency was set up in the year 2006 and was given a license by RBI in the year 2010. The rating agency had a different range of scoring but now they also score in the range of 300 to 900. The report can be sought by paying Rs 138 or the report and score both can be bought online by paying Rs. 399. If you send the request online you can receive the report immediately via email, an offline request may take up to 20 days.

  • Equifax Credit Information Services Private Limited

This agency received its license in 2010 and it also scores between 300 and 900. Basic report and credit score can be obtained by paying Rs. 138 and Rs. 400. Reports are sent within 7 to 10 days of the request being sent.

  • CRIF High Mark Credit Information Services Pvt. Ltd

High Mark was established in 2007 and received the license from RBI in 2010.  High Mark also had a different scoring pattern earlier but now just like the other three agencies above their scores also range from 300 to 900. You can get the report and the score by paying Rs. 399.

All the agencies have a defined and well laid out dispute resolution mechanism. So if you find out there is a difference of 50 points or more between score by two agencies be sure to find out the reason for this discrepancy.

What Do the Credit Score Numbers Mean?

A credit score plays an important role when it comes to opting for a loan or a line of credit like a credit card. Credit scores are used by lenders and various Non-banking financial services to evaluate your capability to avail a loan and make decision whether they can offer you a credit. The score is a result of your payment patterns, any default payments, any past settlements and many more.

There are many different scores which are available in the market for the lenders like Experian, Equifax and so on but Indian banks and non-banking financial services companies prefer CIBIL as their lead bureau for credit scores. Credit Information Bureau India Limited also known as CIBIL was founded in year 2000. It helps providing credit information to Indian banks to filter loan applications.

There are different categories of cibil score which helps boost your loan application and also gives you added benefits while availing a loan. The score ranges from 300 to 850, each financial transaction either contributes or downturn your cibil score.

Today we will sight the score breakdown and help you to understand what the credit score mean,

Score 0-349

If your credit score is between 0-349 this means you have no lending record. Many of us think to make our purchases on cash and do not take loan for any purpose but a no cibil score is equivalent to a bad cibil score. Always try getting small consumer loans from time to time and make regular payments on the same to see a great hike on your score. This will help you get started with the process and in future if you need a bigger loan like a home loan or a personal loan you will be able to avail a loan with ease.

Score 350-650

If you are in this category of credit score, most probably you have made a lot of financial mistakes like not paying your dues on time also if there is a settlement in your account. This will definitely hamper your chances of getting a loan in future. If you have not made a payment on time the transaction remains in your report for at least 5 years. A low cibil score will always pull you backwards from financial harmony, if you need help with repairing your credit, you can always approach a financial professional.

Score 650-699

This is termed to be a safe zone and you need to work hard to reach in the good score range. If you are in this category it is much likely you will get a loan but chances are you will need to pay much higher interest rates as compared to other options available in the market. Try not to default any loans further and you credit score will be up in no time.

 

 

Score 700-759

This category is called the safe category. In general terms you can easily get a loan from any lender without any hassles. This indicates that you make all your payments on time with almost no defaults and also your credit balances are low. If you are applying for a loan, you will get high priority as compared to others and you can also negotiate on the interest rates offered by the bank.

Score 760+

We can say that, very few people achieve this milestone. You can be in high demand between lenders if you fall in this range category. This credit score range means you have financial integrity and do not default your payment even by mistake. You have a long history of line of credits without a single default. They receive the best offer available in the market and also can negotiate with the lender on interest rates, processing fees and so on. It is really hard to achieve this breakthrough, but is even harder to maintain the same.

A credit score states a lot about you when it comes to financial integrity and how you manage your loan funds. It is a ladder you can use to achieve financial milestones and achieve an easy credit in desperate times, but the same factor can be the worst nightmare of your life and can haunt you for a very long time. Borrow responsibly and repay well to live in financial harmony.

What is the Lowest Credit Score One Can Get?

Credit scores have caused a lot of anxiety in recent time. Whether you wish to apply for a credit card, take a loan to buy a car or house or refinance your existing loan; a minimum credit score criteria is a major hurdle that needs to be crossed. Lenders base their approval decisions on the score that you have attained. That is why people are consciously making efforts to increase their CIBIL score.

If you haven’t been paying attention to your score you may be wondering what could be the worst case scenario with your credit profile. What is the lowest credit score that you can get? While a credit score range depends on the credit scoring model that a specific bureau uses to calculate the score, in most cases this number lies between 300 and 850. So theoretically your score can go as low as 300, though it happens rarely.

There are several situations that may cause the score to sink to the bottom. Items like bankruptcy, judgements and tax liens on your credit report are some major causes. Apart from these, information regarding overutilization of credit, late payments, missed payments, and accounts that go into collections also find their way to the credit report and cause your score to plummet. A credit history with a combination of these causes will result in a rock bottom score.

So if the credit score is above the 300 mark, does that mean that you can sit back and relax? Not at all! A score between the range of 300-550 isn’t considered a very good score by the lenders. Each lender has his own threshold mark based on the amount of risk that he is willing to take. You will find it hard to qualify for loans with leading financial institutions if your score is below the 600 mark. So if the score fails to satisfy the minimum threshold limit for most lenders, then you will need to resort to bad credit personal loans. These loans are given at a very high rate of interest to cover the high risk financial behaviour of the borrower.

Can you do something to increase your score? The good news is “yes”. A credit score is a snapshot of your past credit behaviour. If you start doing positive things that are good for the score, it will start showing improvement in a few months time. To begin with, you can get a secured credit card. Here you will be required to deposit an amount that serves as your credit limit. Since the issuers do not check the credit score, this card is easy to obtain even with a low score. Use the card for small expenses every month and make timely payments. You can also take a bad credit personal loan and start making timely payments to build positive history. As new positive information gets recorded on the credit report the effect of old negative information starts diminishing.

People with an excellent credit score have a long history of on time payments and low balances on their credit card. Since they are at the least risk of defaulting such people can easily qualify for loans at low rate of interest. Even if your credit profile is in a very bad shape you too can aim to achieve a high score, by practising good credit management. Here are some good financial habits that you should follow.

  1. Analyse your report to see where you stand and identify actions that are bringing your score down.
  2. Pay your bills before the due date
  3. Do not use more than 30% of the available credit limit on your credit cards.
  4. Avoid opening unnecessary credit card accounts
  5. Do not close old credit card accounts
  6. Maintain a good mix of revolving and instalment credit.
  7. Check your credit report for errors and dispute if you find any discrepancies.

When you are on your journey of rebuilding credit make sure no new negative items enter your credit report. As new positive information gets recorded in the report you will be able to put all your past problems behind and hope for a bright future ahead.

How to Save Money on Your Loans and Improve Your Credit Score in the Report

Loans are part and parcel of our life these days. Anyone who is financially prudent seeks loans to build assets and lead a lifestyle of their choice. Your ability to borrow is not limited to what you earn every month rather your ability to manage finances is something that defines your credit worth. In fact the colour of your credit report indicates your credit health.

Most of us use multiple credit accounts these days like credit cards, auto loan, home loan, personal loan, to name a few. The appetite for credit is not limited to day to day requirements and many of you would desire more loans such as student loan, travel loan or business loan. You can practically borrow for any purpose these days. However your past credit history define if you could borrow more or not.

Anyone who has a current mortgage or multiple loans would probably be using enough of his credit limit. To borrow more you would need to save on your previous loans and create a gap between what you earn and what you are utilizing. It is important to know how to save money on your loans and improve your credit score in the report.

The higher is the score, higher is your loan eligibility. Thus you should always pay attention to your CIBIL score calculation and assess your credit report at least twice a year. Factors that help your credit score include: regular repayment of loans and credit bills, credit utilization ratio, length and age of credits, credit mix and history of loan queries.

Saving on Loans and Improving Credit Score in the Report
One of the smart ways to increase your credit score and avail better rate of interest on a long term loan is by closing your previous loans. By prepaying your previous loan you would build a good history and boost your credit score.

If you are planning home purchase and need loan for the same, the lender would assess your credit history before offering the loan. With low CIBIL score or not so perfect score your low eligibility is low and you could be offered interest on higher rate.

However by prepaying your previous loan you would be marked as a potentially worthy customer and your loan application would be approved. Likewise prepayment of loan also saves you enough money.

To understand how let’s take an example.

Mr. Rajeev Shukla is an IT professional and he has savings of Rs 1000000 in his bank account. His net monthly income (after tax deduction) is Rs. 80000. He spends Rs 10000 as credit card expense every month which he diligently pays before the due date every time. He pays Rs 6000 as his car installment which is calculated at 9 percent of interest every month. The auto installments are due for next 4 years. He wants to prepay auto loan, but he has 4 per cent pre-payment penalty if he pays before one more year.

Mr. Rajeev decides to prepay the auto loan as he plans to raise a home loan of Rs. 3000000 after six months.

By prepaying his auto loan Mr. Rajeev reduces his debt to income ratio. This leaves additional credit limit and makes him eligible for more loan. It also gives him more flexibility to pay for his next loan installment. If he has additional six thousand to pay for loan installment every month he can either have a bigger loan or reduce the loan duration by having bigger installments. Also he can use this money for raising student loan for his daughter’s higher education.

Now coming on to prepayment penalty of four percent, how would he compensate that additional prepayment charge? By prepaying the loan he actually saved five percent which he would have paid as interest in the due course of time. If he could manage to get a better interest rate on his home loan for next 20 years he would further save.

By prepaying loan you would not only save money but also improve your score and worth. Thus a financially prudent person looks at his money from its worth for his future plans and never values it conservatively on its current purchasing power.

Does winning a Lottery affect My Credit Score

Winning a lottery is like a dream come true. If you are one of those lucky few who have won lakhs or crores of rupees in a lottery, you may be wondering its impact on your life. Well, just having the money will not put an end to all your financial woes. How you put it to use is what determines its effect on your financial life. Does winning a lottery affect your CIBIL rating in any way? Let’s find out.

Correlation between credit score and wealth

The income level of an individual or his bank balance has no effect on his credit score. People with a high net worth may not necessarily have a high credit score. The credit score calculation primarily factors in one’s payment history and credit card usage behaviour. So even if a person has a huge bank balance, he will not have a good CIBIL rating unless he makes timely payment of his loan EMIs and credit card bills.

The wealth of an individual may be taken into account when a person seeks approval of a loan application. Banks do check an individual’s bank balance and income level apart from the credit score to determine whether the person has the capacity to repay the loan. Hence winning a lottery may increase your ability to seek loan approvals.

Here is how you can use the money to improve CIBIL score

Though winning a lottery does not have a direct impact on your CIBIL rating, it does give you an opportunity to raise your score by other means. Here is what you can do with the money to improve CIBIL score.

  1. Pay back outstanding dues

If you were unable to clear your outstanding dues in the past because of lack of funds, you would surely have a bad credit history. Late payments, collections, charge offs and other such negative remarks brings down one’s CIBIL rating. Now is the time to put your money to good use. Contact the bank and discuss that you have sufficient money to repay them. Request them to remove your name from the bank’s loan defaulter’s list. Negotiate with them if they can remove negative remarks from the credit report if you clear all past debts.

  1. Reduce credit utilization ratio

Credit utilization ratio plays an important role in CIBIL score calculation. A high utilization shows an over dependence on credit and reduces your credit score. By using the funds to pay off your credit card outstanding balances you can reduce this utilization ratio and work towards improving your credit score. Make sure you do not use more than 30% of your available credit limit. Keeping low utilization levels helps boost CIBIL rating.

  1. Exhibit good credit behaviour

Since you have sufficient money in your bank account, make sure you pay all your bills and EMIs on time. By exhibiting responsible behaviour and making on time payments one can build positive credit history.

What is the Meaning behind Your Credit Score Range?

There is sense of comfort and satisfaction when you know that your credit score falls within the top range. However, what’s the top range exactly? How does it affect your creditworthiness?

A lot of people are unaware of the different types of credit score ranges and how they affect your credit profile.

Taking the CIBIL score range as an example for this post, we will take a look at the different ranges that fall within its entire spectrum.

CIBIL Score Groups

CIBIL scores on a scale of 300 and 900. So, a score of 300 will be the lowest, and 900 the highest. This range is divided into small groups:

750-900

If your score is above 750 then you won’t have any trouble in securing a personal loan, home loan, etc. with a bank of your choice. You can also easily get attractive interest rates with a score in this group.

Most of the people whose scores fall this in this category have three common habits:

  • They always pay their credit card bills and EMIs on time.
  • They have multiple credit cards but their credit utilization is low. So, if their credit card limit is Rs. 5 lakhs, they will use less than Rs. 1 lakh of the same.
  • They don’t close their oldest bank accounts and try not to open new ones

600-749

If your score falls under this range, then you can consider your score “good” but not excellent. What it means is that you are a responsible credit user and know how to manage your money. You try to pay your bills on time but may occasionally be late for a payment or two.

500-600

Any score between 500-600 is a fair score. So, although it’s not a low CIBIL score, it’s not good either. From the perspective of your creditworthiness, you shouldn’t be happy with a score in this group.

Although you can apply for a loan with a “fair” score, it’s not recommended. This is because there is still a good chance of facing rejection. If you apply for a loan multiple times in a short period, then it can actually damage your score further. So, what you should ideally do is work on the score first. Once you have moved from a “fair” score to at least “good”, you can apply for the loan. Not only now you will be able to easily secure it, you can also try to get lower interest rates and more comfortable terms and conditions.

Below 500

A CIBIL score below 500 is considered a low CIBIL score, or rather a “poor” CIBIL score. As you can expect, this means that you will only have problems such as:

  • Obtaining any kind of loan itself can become extremely challenging. Even if you are able to convince a lender to overlook the score, you will have to pay a high interest rate that will make the proposition not worth it.
  • As many finance companies have started screening the job applications on the basis of the credit score as one factor among many, you can have a tough time securing a job too.
  • A poor score means that you will be under high stress and financial insecurity.

0 Credit Score

If your credit report shows “0” credit score, then it’s natural to be worried. However, there is no reason for that because, in most credit reports “0” doesn’t signify the lowest score, but rather than the lack of credit history. In other words- if you have never taken credit in any form, such as credit cards, loans, etc. in your life, it means there is no credit information available, and hence no credit score yet. Once you are under any kind of debt, your lender will submit the information to the credit rating agency and your credit report will be created.

Meaning of Credit Score Range

By matching your credit score with the different groups given above you can easily self-assess your creditworthiness. If your score is poor or even just “fair”, it’s best if you can take it up a notch. This is because your credit report is extremely important, and you should try to keep it in a good condition.

The Credit Report You Haven’t Seen Yet, May Scare you

People who are careful about their physical health usually go in for an annual health check-up, just to make sure that everything is fine. Similarly people who take their financial health seriously should keep an eye on their credit score and report on a regular basis. Your credit report shows a complete record of all the credit accounts. Your credit score is calculated based on the information in credit report. Depending on how you manage your credit and how you handle the payments the credit score determines whether you are a worthy borrower. Checking your free CIBIL report every year helps in keeping your financial life in order. It helps in making sure that all information recorded about you is true and up to date. It helps in uncovering frauds in a timely fashion before the situation goes out of control.

Many people do not care about credit reports until they find a need for a new loan. Many people just check their report before finalizing a car loan, to see whether their credit profile is strong enough to help them bargain for better interest rates. If you are one such individual who hasn’t paid attention to your credit report till now, you may be in for a big surprise. You may find entries in your report that may give you a shock of your life.

Errors in CIBIL report are quite common these days. Such errors are capable of bringing a huge dip in credit score if not corrected on time. Identity theft cases are already on the rise. If someone is using your name to commit a fraud or if someone is charging credit card expenses in your name you may not even be aware of it until you check your credit report.

Finding out that your credit profile is in a mess at the time when you are seeking out a car loan is quite scary. To avoid such a situation one should regularly order the CIBIL report and check it for accuracy.  Check whether you recognize all the loan accounts and credit card accounts that are opened in your name. Ensure that you recognize the transactions made using credit card. If you spot any accounts in your report that you have not opened, any transactions in the billing statements that do not belong to you, or any collection notices that you do not recognize then it could be an identity theft case that may ruin the credit rating.

Immediately report such cases to the creditors who are reporting the fraudulent information and dispute these errors with the credit bureaus. You may also put a fraud alert to the credit report so that no new accounts are opened in your name. Follow up with the bureau till the item is removed from the report.

You should even get small errors like misspell name or address rectified. Such small errors, if not rectified on time, may become a reason for a bigger problem later on. If you want to protect your financial life you should take the complete onus of ensuring that your report is showing true and correct information. To get the errors fixed you can submit a dispute to the credit bureau through email. The bureau will contact the original source of information to verify the details. You may even send supporting document as proof to both the bureau and the creditor to speed up the process.

Apart from errors, even true information in the credit report might take you in for a surprise. Many a times, it is only when you see your credit report and analyse the factors that are bringing your score down do you realize your mistakes that you’ve been doing in the past.  A review of correct information like late payments helps in realizing that small mistakes can prove disastrous for the credit score.

With millions of consumer records being processed every day, errors in credit reports are bound to happen. If you want to avoid unpleasant surprises at the time you need your score to be at its best during loan approvals, monitor the report on a regular basis. It will help you uncover problems before they become difficult to manage. Order your free CIBIL report today.

The 4 Things That Affect Your Credit Score

It’s foolhardy to underestimate the significance of CIBIL score. You might be earning a sizeable income and have multiple assets to your name, but if your CIBIL score is not up to the mark, you can lose the very chance of obtaining a personal loan, home loan, or rather any other type of credit from a bank.

Fortunately, it’s never too late to start caring about your CIBIL score calculation. So, if you want to become more careful with your credit usage, it can help to learn about the top 4 things that affect your CIBIL score:

  1. Payment History

Late payments are often the biggest reason behind a low CIBIL score. These include credit card bills, loan EMIs, etc.

When you don’t pay your credit card bills, etc. on time, it reflects irresponsibility towards money management. Moreover, it shows that you can’t be trusted with credit. Thus, credit rating companies such as CIBIL, Equifax, etc. can deduct a large number of points from your score.

If you want to increase credit score in the fastest way possible, then just start paying your bills on time. Set up reminders on your phone if need be, but make sure that you don’t delay a single payment ever.

  1. High Credit Utilization

Credit utilization plays a big role in CIBIL score calculation, but what’s it exactly?

Credit utilization is the ratio of the amount of credit you spend every month on average to the amount of total credit available to you.

For instance, if you have 2 credit cards, with Rs. 50,000 credit limit on each, then the total credit available becomes Rs. 1 lakh. Now, if your monthly expenditure with the cards is about Rs. 60,000, then the credit utilization ratio becomes:

60,000/100,000 = 0.60 = 60%

If your credit utilization ratio is high, then it can have a negative impact on your score. Although the exact threshold varies from one credit bureau to another, usually it’s around 35% to 40%.

So, by lowering the credit utilization ratio you can increase credit score. The following are two ways you can do that:

  • You can stop using your credit cards frequently. Instead, make payments via mobile wallets, net banking, or even cash.
  • Get a new credit card so that the overall limit is increased and the credit utilization ratio is lowered.
  1. Credit Report Discrepancies

When was the last time you checked your CIBIL report? If there are any mistakes in your personal details, banking data, etc. in your report then it can affect your CIBIL score calculation.

To make sure that your CIBIL report doesn’t damage your credit score, it’s important that you go through an updated copy every now and then. The following are some of the things you should look for: unfamiliar credit card/loan accounts; discrepancies in payment history, personal details, etc.; and false tags such as “settled account”, “defaulting”, etc.

  1. Too Many Loan Requests

When you need a personal loan or a home loan on an urgent basis, then it’s natural to assume that submitting multiple applications to multiple banks can greatly increase your odds of getting an approval from at least one lender. However, nothing can be further from the truth.

When you send out the loan applications at the same time, credit bureaus sense an urgency in this behavior which is not good from the lender’s perspective. Thus, your score could take some damage by this.

In other words, rather than increasing the possibility of you getting a loan, sending multiple loan applications around the same time, can, in fact, lower your odds even further.

If you really want to make sure that you get a loan in the first few attempts, then you must check your CIBIL report first. If it’s all good, you can get a loan without a problem. If it’s not, then you can improve it first, and apply for the loan only after that.

So, these were the most common things that can affect your CIBIL score. Be sure to adjust your credit behavior accordingly so that no only you can prevent your score from any damage, but rather increase it even further.

Length of Credit History vs. Late Payment History, where do you stand?

All of us would have had history as a subject in school. And many of us would also have cribbed about why to learn about something that has gone past. However, the fact is that history is something that all of us have a lot to learn from. We can improve our present by reviewing our past. Goes without saying that our present is an outcome of our actions in past and studying our past does help us in taking better decisions at present.

You must be wondering how is this related to your credit profile. It indeed is. There are two important historical trends that make or break your credit score. In fact these two have the potential to either put you at a position where you are able to save lakhs of rupees or can become part of the loan defaulter list. The two important historical trends that we are referring to here are “length of credit history” and “late payment history”. Let us look at these two important aspects and how do they impact your credibility.

Length of credit history

The length of your credit history means that how long you have been holding a trade line. This is one of the most important aspect reflecting on your credit report that makes your healthier on credit front.

To explain it better, let me put you in a situation. Two known people approach you for Rs 10,000 each. One of them has been known to you for a few years now and you are aware of his history of borrowing money  few times and also about his commitment to repay as soon as the salary gets credited. The other one is a new acquaintance who has joined office about 2 months back and you do not have much awareness about his past. Who would you be comfortable in lending your hard earned money? I am sure your answer would have been the first one.

Similarly the length of credit history reflecting on your CIBIL report helps in establishing a comforting factor with the underwriter of the lending institution. A person who has enjoyed credit facilities from various banks for years v/s a person who is new to credit makes a lot of difference in the process of evaluation.

But the loans keep getting closed over a period. The fact also remains that you would want to pre-close it in case you have some funds available with you. So how to manage the length of credit history? Do not close that old credit card that you may feel has become obsolete in terms of its features. Continuing with that credit card will only help in keeping your credit scores healthy.

Late payment history

While the underwriter evaluates your loan application, the way you have managed your credit in past becomes the single most important factor that can lead to approval or rejection of the application. How have you faired against the payments would lead to impacting the outcome.

Again referring to the above example, if the first person who you had known for a few years had only paid other friends after some follow up or has had defaulted on even one friend’s loan (while paying the others in time) you would be skeptical on extending him with financial help. Just like you, even the structured lending institution would be apprehensive of giving a line of credit to an individual who has had default reflecting on the bureau report. Thus it becomes very important that all loans and credit card payments are happening in time without any delay.

Your length of credit and your repayment history are the two most important pillars of your credit profile and must be maintained. In the absence one may not have access to funding at the time of need.