We all remember those grim childhood days when our teachers handed out our Report Cards to our parents for careful scrutiny. And if our results were not up to the mark, we knew it very well what was coming next. For some, it meant being grounded for a month, for some others it meant Xbox confiscation yet the common penalty was seized freedom. Why? Well, for the inability to honour and uphold trust.
Based on the above analogy: A CIBIL or Credit Report is your Report Card which determines whether you can have a Consumer Durable Loan (read freedom or Xbox). Before offering you with a Consumer Durable Loan, lenders will go through your annual income and CIBIL Report. They will do so in order to ensure that you can repay the loan on time as Consumer Durable Loans are unsecured loans.
But what exactly is a CIBIL Score?
To be precise, a CIBIL Score is a three-digit number which defines your credit history. This score or number is derived from one’s credit history found in the CIBIL Report (Also known as CIR (Credit Information Report). Excluding details of one’s savings, investments and fixed deposits; a CIR holds a person’s entire credit payment history categorized into separate loan types and credit institutions from which the loan was taken.
How does it impact Consumer Durable Loans?
Your CIBIL Score is the rank on your Credit Report that determines where you stand as a borrower in relation to potential lenders. Consumer Durable Loans are unsecured loans, meaning unlike secured loans, you do not need to allocate any of your assets as a security against the repayment of such loans. So, naturally, a lender needs to verify your credibility as a borrower based on your repayment history. The lender will only give you a loan if they are convinced that you’re a safe case on the basis of your Credit Report.
Therefore, it is in your best interest to get your CIBIL Score checked regularly and to get the issues (if any) fixed. The purpose of this is to verify that your CIBIL Score represents your factual financial position and has not been lowered owing to any technical errors.
Factors affecting your CIBIL Score
In order to ensure that you have a good CIBIL Score (Typically, a score above 750 is considered good), you need to know the various factors that affect your Credit Ranking –
- The most important factor is your Credit Repayment History which includes all defaults on loans and credit card bills
- Credit Utilization Limit
- Multiple Loan Applications
- Loan Servicing Term
- Percentage of Unsecured Loans
- Negligence in making regular Credit Report Checks
- Increase in Credit Limit
What can I do to improve and maintain my CIBIL Score?
Following are the ways in which you can keep a good Credit Score and avoid being turned down for a quick loan in the future –
- The most important thing you need to do is to ensure that you pay your bills on time and maintain a good repayment history. And by bills, it means all your bills, not just credit cards and loans. Even a minor library fine could negatively impact your CIBIL Score if you fail to make a timely payment and it lands into the hands of a collection agency.
- Another way to maintain a good CIBIL Score is to never cross your Credit Card’s credit limits. Keep your Credit Utilization Limit low.
- Try to keep your debt as low as possible as this can also negatively affect your Credit Score.
- Avoid making too many credit inquiries, be it for a Credit Card or a Loan as this can also have a negative effect on your Credit Score. Apply only when necessary.
- Frequently check your Credit Report in order to ensure that the Credit Bureau’s and your records tally. Technical errors can happen and those errors could end up negatively impacting your CIBIL Score. With the rise in Identity Theft and Credit Card frauds, it is advised to get your CIBIL Report checked at least once every six months.
If you have your Credit Score under check and are in need of a consumer durable loan, you can easily apply for one with Financial Institutions like Tata Capital who provide instant loans on over 100 Lifestyle products. Not only that, they provide interest-free loans with easy EMI repayment options. So, hurry up and let your heart have the luxury it desires!