This article is authored by Rajiv Raj, Director & Co-Founder of CreditVidya.
As India gets more globalized and lifestyles change, our dependency on credit has become an important aspect of our lives. But not many of are aware of the consequences of every small financial action taken.
An individual’s credit score provides the lender an insight into how creditworthy s/he is and goes on to play a significant role in the loan approval process. The Credit Information Bureau Limited, or CIBIL, is India’s first credit information company founded in 2000.
Here's how you can build on or improve your CIBIL score.
The Wrong Way: Have little or no credit.
The Right Way: The truth is, the more credit you take, the better your scores are. Now that does not mean you max out your credit. By more credit we mean different forms of credit. But, I repeat, make sure you do not end up exhausting your credit limit.
The Wrong Way: Keep your credit history short.
The Right Way: The longer your credit history, the better your scores are. It’s simple: A person with 5 months of prompt repayment compared with one of 5 years of prompt repayment. Who would you loan your money to?
The Wrong Way: Having a credit card is bad.
The Right Way: A
credit card is the most popular line of credit for a person wanting to build a credit history. If you are new to credit, get yourself a credit card. If no company is offering a credit, get a secured card.
The Wrong Way: Do not have a mortgage.
The Right Way: Having a mortgage and the thought that you have to pay installments month after month for years may seem overwhelming. But that is best way to get your credit score in order. It gives the much needed longevity for your credit history.
The Wrong Way: Never get a student loan.
The Right Way: On the contrary. Taking a student loan is a good way to start your credit history. It helps in building a credibility that lenders need to offer a loan to an individual.
The Wrong Way: Delay payment on bills.
The Right Way: Stay out of credit troubles. This can be done by making your payments on time and not utilizing your credit fully. It also helps to keep your balances under 30% of credit eligibility.
