What is Credit Score?
A credit score is a 3 digit figure which is generated with the help of a mathematical algorithm which uses the information present within the credit report. It’s intended for predicting risk, explicitly, the probability that you would become earnestly negligent with respect to your credit obligations after scoring.
In other words, it is a rating which is assigned to an individual based on his credit report. This credit report provides the details about the debts over an individual, the credit which the person might have availed as credit cards or loans, his history of default and repayment and various other details.
In India CIBIL gathers and preserves records of each person payments with respect to credit cards and loans. All of these records are then provided to CIBIL by each of the member banks and other credit institutions and this activity is performed monthly. The information so provided is used for creating CIR (Credit Information Reports) and credit scores that are made available to the credit institutions for assisting them in evaluating and approving the loan applications from various individuals. The main reason behind the creation of CIBIL was to play a crucial part in the country’s financial system; assisting providers of the loan in managing their business and assisting consumers to secure credit quickly and at better terms.
With Poor Credit rating, or say CIBIL Score, no Banker would easily extend you loan and even if it does, it will be at higher rate of Interest, Simple precautions can help you keep a healthy CIBIL Score
How to Improve your credit score
– Pay your loans on time: In case you are having loans that you have been neglecting and delaying their payments then you must pay them off as a priority. In case you are not able to clear the entire loan amount at once, you should check with your bank and get them converted into convenient EMIs.
– Pay your credit card bills on time: If you own credit cards, one of the best advice that someone can give you is to avoid coming too close with your credit the limits pertaining to each of your credit cards. You must ensure that you do not just repay only the minimum amount which is due but the entire sum or a good substantial amount.
– Don’t borrow heavily: In case you are applying to way too many loans or your credit limit is always near the threshold of your credit cards then there is every possibility that your score is to down as such deeds exhibit a behavior which is considered as credit hungry. Avoid to take an unnecessary loan and make ensure that you don’t reach close to your credit limits on your credit cards.