The importance of a credit score and how a credit card can help you increase your score If a lender has rejected your loan, and you are wondering why, the culprit may be a low credit score.
Your credit score is an important indicator to lenders of your ability to repay loans. A credit score is a three-digit numeric summary of your entire credit history. It is prepared based on data gathered from lenders and is consolidated in the Credit Information Report or CIR.
Financial institutions use your credit history and score as one of the factors to determine whether to lend you any money, how much and at what rate.
Credit rating agencies such Credit Information Bureau (India) Ltd gather data and put together the credit score.
The benefits of a good credit score
A good CIBIL score (of 750 and above) can get you:
Lower interest rates
Higher loan amount,
Quicker loan approvals
Longer repayment periods
What to do to increase your CIBIL score: • Make payments for your loan dues on time • Maintain a balance between secured and unsecured loans. • Reduce the number of loans you borrow in any year. • Keep a balance between your income and debt.
Another good way to increase your credit score is by prudently using your credit card. Here are a few tips:
Keep well within your spending limits. Maxing out on your credit cards every month may be considered impulsive by lenders
Pay your bills on time: Settle your credit card bills in full every month well before due date. Avoid revolving credit, as it may be seen as risky credit behaviour. Settling your dues on time will save you late fees as well as interest costs, and improve your credit score.
