When it comes to your credit score, a small error can lead to a big stain and that would lead to a long drawn effort to have the course corrected. One thing that you should be totally aware about is that the issue that these fumbles become part of your credit history and does not ever go away. Unlike some developed economies where the historic data gets purged, in India, every account with historical payment history and negative flags do not get purged. Just like small mistakes in life can lead to complications, slips up on credit front are bound to add to difficulties.
Following is the list of five such mistakes that must be avoided.
Just like one's physical health, which keeps changing with change in external factors, the credit score also keeps changing with time. There are multiple factors that will impact your CIBIL rating. You cannot take your score for granted and it is advised that you must check your credit score regularly.
In case you are unaware, please note that all four credit bureaus in India are obliged to extend a free credit report to all individuals every year. So make use of the facility and check the reports. You would be required to check your current score, check if all accounts are reflecting correctly and no erroneous entry or loan account is reflecting on the report.
Casual approach towards repayment of your EMIs can be fatal, especially if it is missed in the beginning of loan term. Many people since are unable to remember the first payment date are unable to keep the bank account adequately funded and hence the bounce. You would need to ensure that such critically important dates are not missed out at all. The repayment of loan or a credit card has to happen on or before the due date without exception.
Going on a shopping spree without a thought on how you would repay that high interest outstanding on the credit card is irrational. Not only would it add to stress on finances (owing to higher repayment from the earning and the high interest rates getting charged on the outstanding amount) it will also have an impact on the credit score. Your credit utilization has a 30% weightage on your credit score and as you inch closer to the credit limit, it starts impacting the CIBIL score negatively.
In case you are in need of a loan, do not shop around. Every time an inquiry hits your bureau report, it has a negative impact. Multiple inquiries in short time will not only lead to adverse influence on your credit score but more importantly will also get construed as credit hunger and desperation for funds. This will only lead to rejection by the underwriters. You may in such a situation be required to personal loan for CIBIL defaulters. So if you have to check out the best suited lender for yourself, invest some time by visiting their websites or calling up the customer care. Alternately, you can even visit the sites that post comparison on various product offerings from different lenders. However, these sites may also show data that is skewed towards their own commercial objectives.
Not taking your old credit card seriously is another common mistake that most of the people occur. Closing out that good old credit card on receiving a new card from another issuing company is incongruous. While the new credit card may have better features, do keep the old card as well. It is like that old fried that will always be your side in difficult times.
Firstly, the length of your credit accounts is one of the major factors to impact the score. So the old card is going to be of help. Second, it will only facilitate keeping your credit utilization under check and hence impact the score positively.