Know what is the In thing now

5 important steps to keep your CIBIL score healthy

Healthy CIBIL score

Maintaining financial hygiene requires individuals to actively maintain a good CIBIL score. Lenders utilize this three-digit number, ranging from 300 to 900, to assess a person’s creditworthiness. A higher CIBIL score indicates a lower risk of loan defaults. In fact, to secure loans and credit cards with favourable terms and conditions, it is essential to maintain a good CIBIL score. However, certain actions, such as loan defaults, missed payments, or excessive credit inquiries, can have a negative impact on the score.

Financial hygiene is crucial for a healthy financial life, just as personal hygiene is essential for maintaining physical health. It involves responsibly managing finances, organizing them efficiently, avoiding debt, making intelligent investments, and establishing a strong financial foundation.

Good financial hygiene includes:

  • Staying informed about your credit score.
  • Regularly checking your credit report.
  • Taking steps to protect your identity and financial information from fraud and theft.

Read on to know 5 important factors that can impact your CIBIL score.

1. Pay bills on time: Late payments significantly affect your CIBIL score. It is crucial to ensure that all bills, including credit card bills and loan repayments, are paid on time. If you are unable to pay the full amount, making the minimum payment can prevent any negative impact on your CIBIL score.

2. Avoid applying for excessive credit at once: When seeking credit, lenders review your credit report, and numerous inquiries can harm your CIBIL score. It is best to avoid applying for excessive credit simultaneously and instead stagger your credit applications.

3. Monitor your credit report: Regularly monitoring your credit report is vital for maintaining a healthy credit profile. It contains information about your credit accounts, payment history, inquiries, and other details that determine your creditworthiness. Reviewing your credit report ensures accuracy, detects errors or fraudulent activity, and allows you to take immediate action to rectify them. It also helps identify areas for improvement, such as reducing debt or making timely payments. Moreover, knowledge about your credit report enables you to negotiate better rates and terms with lenders.

4. Keep old credit accounts open: Maintaining a positive credit history is crucial for calculating your CIBIL score. Therefore, it is advisable to avoid closing old credit accounts, even if they are not regularly used. Closing such accounts may reduce the duration of your credit history, negatively affecting your CIBIL score.

5. Use credit wisely: While credit can be helpful for purchases and investments, using it irresponsibly can lead to overwhelming debt. By using credit wisely and avoiding excessive utilisation, you can prevent falling into a cycle of debt that negatively impacts your credit score and overall financial well-being. Keeping your credit utilisation ratio (the amount of credit used compared to the credit limit) below 30% is recommended. Excessive credit utilisation suggests to lenders that you may struggle to repay your debts.

The final word:

Nowadays, your CIBIL score plays a crucial role in your financial life. By actively following these five tips, you can safeguard your CIBIL score and ensure a solid financial position when you require credit in the future. Building a good credit history takes time, so exercise patience and maintain discipline in your financial habits.

You might also be interested in

Get the word out!