Know Why Having a Good CIBIL Score is Important
A CIBIL score is one of the most important factors considered by lenders while offering you both a credit card and a loan including a personal loan, home loan, automobile loan, LAP, etc.
What is a CIBIL Score?
A credit score is a 3-digit numeric summary of your repayment behavior and credit history that is calculated by credit bureaus to know your financial fitness and creditworthiness. These credit bureaus (mainly CIBIL, Experian, CRIF High Mark and Equifax) are authorized by RBI to collect data from partners to evaluate your credit score. The range of credit score varies from 300 to 850 and a credit score of above 750 is considered healthy for lending.
Why is it Important to have a Healthy CIBIL Score?
A good CIBIL score can help you enjoy the following benefits:
- Get a loan from lenders quickly: A good credit score allows you to easily get a credit card or loan from lenders. This happens because your healthy credit score makes the lenders believe that you have repaid the loans on time or a bit early and will continue to do so in future
- Low interest rate: Those individuals with a good credit score get loans at a lower interest rate as compared to the others
- Attractive credit card offers: Individuals with a high credit score get various offers from different credit card companies but these offers are not offered to individuals with low scores
How to maintain a Good Credit Score?
- Pay your EMIs on time: Make it a thumb rule to always pay your credit card bills and loan EMIs on time. As any delay may bring your credit score down by a few points
- Maintain your credit utilization ratio: It is a ratio of the limit of your credit card and total outstanding amount. You will have to ensure that the ratio is 30% to keep your credit score stable. You can limit your spending and avoid exhausting the credit card to its upper limit every month
- Have a healthy credit mix: A credit mix is a proportion of secured (automobile loan, home loan, etc.) and unsecured loans (credit card, personal loans, etc.). You must make sure that your credit history is a healthy mix of both secured and unsecured loans. As, if you have more number of unsecured loans, you are not considered creditworthy
- Avoid applying for multiple loans simultaneously: This practice can bring your credit score down. How? Every time you apply for a loan, lenders check your profile and such inquiries are marked as ‘hard inquiries’ in your credit report. And, every time your loan application is rejected, your credit score is cut down by a few points. Also, these inquiries are visible to other lenders and they consider you as a credit hungry person.
- Review your credit report regularly: Your credit score is calculated by the credit bureaus on the basis of the information provided to them by loan and credit card lenders. However, if any wrong information gets listed in your credit report, either due to a manual error by the lender or any fraudster, it can impact your credit score.
Therefore, review your credit score regularly and get the errors rectified, if you find any
How can You Check your CIBIL Score?
In order to stay updated on your creditworthiness and to identify errors, it is important to keep a regular check on your credit report. You can check your credit score for free through Paytm App. All you need to do is – fill in some mandatory information like full name, mobile number, permanent account number, etc. and you can immediately proceed to view your free credit report.
Useful tip: You can fetch your credit report on Paytm app unlimited times as it is a soft inquiry and does not impact your credit score.