An individual CIBIL score is a three-digit measure of creditworthiness and, wherever applicable, that of an individual business. CIBIL scores span from 300 to 900, and those in excess of 750 are usually accepted as positive by most lenders. This score decides whether he can get loans or credit cards. The CIBIL score is affected by numerous parameters impact the CIBIL score, and knowing these important parameters, can help in managing finances better and keeping a good credit profile. This is captured in the phrase "Parameters have an impact on the CIBIL score."
The important
parameters impact the CIBIL score are:
Payment History:
It is one of the foremost parameters that impact the CIBIL score How timely credit
card bills and loan EMIs are paid, or how many payments are missed or defaults
occur, is very likely to all lower the score significantly.
Credit
Utilization Rate: Credit
utilization ratio-the indebtedness proportion to the credit limit. A greater
ratio means stronger reliance on credit and might depress the score. Ideally,
keep utilization/purchases under 30% of the entire credit.
Mix and Duration
of Credit: A mixture of secured
loans (home or automobile loans), unsecured credit (personal loans or credit
cards), and longer history of regular repayments is likely to be positively
impacted on the score.
Unsettled Debt: Unsettled debt-unpaid dues or
balances-also damages the score. Even less payment can change the credit report
since it is unpaid for quite a time.
More Credit
Applications: The higher
number of credit applications brings more hard inquiries into the report within
the short period that indicates you are actively seeking credit-which can lower
the score.
Minimum
Payments: Only paying the
minimum due each month can trap you in a cycle of credit card debt and
indicates poor discipline with financial matters, these parameters impact the CIBIL
score, negatively.
How those parameters
impact the CIBIL score?
Pay on Time: All bills and EMIs must be paid on or
before the due date. Reminders or auto-debit can help prevent missed payments.
Limit Credit
Utilization: Use below 30%
of the Total Limit. If that is not enough, ask for a higher credit limit,
keeping the ratio low.
Maintain Mixed
Credit: Do not rely on
unsecured loans alone. Making sure you have secured and unsecured debt presents
you to be a responsible borrower.
Clear Out
Pending: Always check
your credit report; any pending dues should be cleared. Even minor amounts
should be paid rather timely.
Avoid Frequent
Applications: Apply for
credit only when absolutely necessary. For applications of loans or cards, wait
a little while before reapplying if denied. Pay Full Amounts: Pay off as much
outstanding balance on credit cards as possible rather than just the minimum
due. Thus, one minimizes interest and supports a higher score.
In essence, to
maintain a good CIBIL score, one has to be financially disciplined. For
example, understanding and actively managing these parameters well would give
better chances of obtaining credit on favourable terms.
