We all make mistakes. However, some mistakes lead to more serious repercussions than others, such as the credit score mistakes.
If you have any friend or a relative who is trying to get a loan for low CIBIL score, then they can testify that it's nothing less than a herculean task. Unfortunately, a large number of people overlook the significance of CIBIL score and realize their mistake quite late in life.
If you want to ensure that your CIBIL score calculation is not stymied in any manner, then the list of all the common mistakes given below can be of great help.
Everyone knows that late payments is a bad thing. However, most people don't know the huge impact it has on their credit score and that's precisely the problem.
Believe it or not- most credit rating agencies give the maximum weightage to the payment history in CIBIL score calculation. So, if you don't want to end up with a poor credit rating, you must ensure that every single loan EMI and credit card bill is paid on time.
One must always help others whenever there is an opportunity. However, in the process, they must also protect themselves. This brings us to the act of becoming a loan guarantor for someone.
When you become a loan guarantor, you take a big responsibility. If down the road, the loanee is unable to repay the loan, then not only you could be held accountable, your credit rating could also be wrecked completely. So, unless the person is your family or someone who you can trust a 100%, becoming a loan guarantor can have disastrous results.
Closing a credit card account can have a huge impact on your credit score in two manners:
The takeaway point here is that you should be extra careful when you have to close a credit card account because a single wrong move can do a lot of damage.
Most times, people start monitoring their credit report when they are unable to get a loan for low CIBIL score. Ironically, this problem can be easily avoided if they start paying attention to their report earlier.
It's a good practice to start monitoring your CIBIL report well in advance, even when you don't need a loan or a credit card in the near future. This is because the sooner you start, the more control and time you will have to work on your rating.
This one was covered briefly above but needs to be addressed individually as well.
One of the biggest mistakes people make that destroys their credit score is a nonchalant use of a credit card.
If you tend to maximise your credit cards often, then you are most likely damaging your CIBIL rating in the process. Instead, you should try to keep the utilization ratio below 35%.
Making minimum payments for your credit card bills is never good for your CIBIL score. This is because this leads to debt accumulation which affects your CIBIL score calculation. So, it's better to use your cards only so much that you can pay the bills in full.
So, if you are careful with these mistakes, then there is no way you can't attain an attractive CIBIL rating.