Conducting a regular CIBIL score check is an important practice you should follow to ensure good credit health. A good credit score is essential because it speeds up the credit approval process and gives you quick access to the required funds. A good credit score implies that you are a low-risk borrower, and as a result, lenders offer you new credit with ease. Moreover, you become eligible for better repayment options that make borrowing affordable.
However, a CIBIL score check becomes ineffective if you do not know what actions are good for your credit score. Since it is calculated based on different factors, not knowing what is decreasing your score keeps you from focusing on improving your score. To give you a more holistic view about what not to do, here are 4 mistakes that can tank your credit score and, thereby, your creditworthiness.
Missing Or Defaulting On Monthly Dues
Your repayment history is an important factor that lenders and credit rating agencies assess while determining your creditworthiness. It dictates a pattern, which offers insight into what to expect in the future. As such, it is an important factor and influences your credit score greatly. Missing out on even one payment can lower your credit score. So, set reminders and ensure that monthly payments go out on time. You can check your outstanding balance while you do a CIBIL score check and plan your finances accordingly.
Being Too Dependent On Credit
While having a high credit limit can come in handy, depending too much on it negatively affects your credit score. This is because lenders view it as an inefficient way of handling personal finances in instances of excess utilisation of credit. In some cases, being overly reliant on credit can make you a high-risk borrower. To maintain a healthy credit utilisation ratio, you should utilise no more than 30% of your total credit limit.
Applying For Credit Too Frequently
Applying for credit too frequently can lower your credit score for two reasons. The first reason is that it results in too many credit inquiries into your credit profile. These are known as hard inquiries, and they temporarily lower your score. The second reason is that it indicates that you are a credit-hungry individual. The first reason is that it lowers your credit score and can cause a noticeable dip if you continue applying.
To avoid such issues, check your credit or CIBIL score and view your credit report. Note the number of inquiries registered on your profile before you apply for new credit.
Having Too Much-Unsecured Credit
A responsible borrower has experience with both forms of credit – secured and unsecured. Unsecured credit is usually easier and quicker to avail of from the two options. Some lenders may even offer instant funding, and while this may be tempting, you should borrow smartly. This means trying to maintain a healthy balance between secured and unsecured credit. Having too much unsecured credit on your profile makes you a high-risk borrower, and some lenders are less likely to sanction a loan if you already have a lot of existing debt.
When learning to improve CIBIL scores, remember that there is no substitute for conducting a thorough review of your credit report. By doing so and keeping these pointers in mind, you can avoid any mistakes you may have been making or may have unknowingly made in the future. With a regular CIBIL score check, you can get better insights into your credit profile and how your credit decisions affect your score. As a result, it is one of the most important practices you must follow to have a good credit score.
Since you can only check your credit score for free once on the official CIBIL website, you can find other ways to carry out a free CIBIL score check. Many lenders offer you a free service to check your credit score. Among these, Bajaj Finserv offers a free CIBIL score check service that takes just a few clicks and gives you results in a matter of minutes. Check your CIBIL score online today to boost your creditworthiness and avail better credit offers.
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