A Credit Score is a three-digit numeric summary of your credit history. The credit score is a result of complicated statistical analysis of information that is available in your credit report. All the information used to create your credit score is drawn from your Credit Information Report (CIR). A CIR is an individual’s credit payment history across loan types and credit institutions over a period of time. There are several variables that are used in creating your standard score like past payment history, balance outstanding, credit account status, age of accounts etc. A CIR does not contain details of your savings, investments or fixed deposits.
CIBIL Score has become one of the most important parameter to decide whether a person shall be getting new loans or not. Following important points should be kept note of:
i. The score is out of 900. Higher the points, better it is. Normally, lenders look for a score of at least 700 to decide on whether to lend or not. This is the 1st level of filtration.
ii. Too much of enquiry / queries, even without availing any of those loans, reduces the CIBIL Score, on an average by 5-10 points per query. This shows that the borrower is credit hungry.
iii. Not having any loan facility / credit card does not imply good CIBIL Score. The score shall be good only when the repayment track record is good. Thus, some amount of borrowing & properly servicing them improve one’s credit score.
iv. Try to have a healthy mix of secured (car loan, home loan) & unsecured loans (credit cards, personal loans). Skewness towards unsecured loans should be avoided.
v. Ensure timely payment of dues & avoid late payment, fines, etc. Otherwise this unnecessarily pulls down the score.
vi. When you have guaranteed any loans or for jointly held accounts, the action of other n person also has a bearing on your credit score. Thus, keep an eye to ensure that they pay their dues timely.
vii. One can always buy online their Credit Information Report (CIR) and see their respective score by paying a nominal charge.it contains the complete details of your credit history across various lenders and products. One should review this at regular intervals and keep oneself updated.