A good CIBIL score is the first stepping stone to getting any loan sanctioned. A CIBIL score could be a deal breaker or could get you concessions and privileges - this three digit number is important. So what can you do to keep your credit score in the green? Here are four lifelines that can help:
1. Save the date
The biggest disservice anybody could do to themselves in terms of their CIBIL score is not paying on time. Paying on time is the simplest and yet the most powerful tool you have if you are looking at maintaining or improving your CIBIL score. A recent policy change announced by the Reserve Bank of India gave three extra days to all the credit card holders to make their payments. However, it will be better to consider those three days as a safety net and stick to the due date for payments.
Setting up an auto debit mandate is the best way to ensure that there are no delays in paying the loan EMIs but one needs to ensure that the account is funded at the right time. Setting up the auto debit mandate from the salary account after the salary credit date will take care of the account being funded on the debit date. If you are not comfortable with the idea of the auto payment mandate (especially for credit card payments), you should set up a reminder for the payment date. Put the date on bold in your calendar, put a post about it on your workstation, set up a phone reminder or devise any other way that works for your but save the date for your payments and always pay on time.
2. 'Old is gold'
CIBIL score is all about credit history - past loans and credit card dues. How the borrower has treated his/her debt lays the foundation of a good or bad credit score. A long, well-serviced loan shows good credit trail which has a positive impact on the credit score. Therefore, prepaying a loan may not be such a good idea for your credit score. The deeper the loan repayment history the better it is. The same applies for the credit card; it is better to keep a card which you have held for a few years. If you have multiple cards and need to surrender a card for any reason then keep the older card and submit the newer one. Old debts are indeed gold for your credit score.
3. Do Away with irritants
A small irritant can cause big trouble. Those old balances, unpaid dues, open loans due to NOC (no-objection certificate) not being taken are like eyesores in a CIBIL report. Though these may appear like small issues but can pull down your CIBIL score considerably. An unpaid card due, however small, if left unattended accumulates into a big balance that keeps growing month-on-month and is reported to the credit rating agency every month. Similarly, if a loan is paid in full but the NOC is not taken, it reflects as an open loan. Sorting out these issues may require time and effort but they should be dealt with at the earliest. In case of old pending dues, the financial institute is usually willing to meet the defaulter, so negotiate with them to reach a viable solution.
4. Keep the spending under control
Festivals, end of season sales, partying with friends are all great excuses to go overboard on your credit cards. Credit cards can be a like little genie that helps in fulfilling every wish but if not controlled it can turn into a monster. So keep under control the urge to whip out your credit card and swipe it mindlessly. Budget you monthly credit card spending and stay away from the temptation. Spending more than you can pay at the end of the month can lead to unpaid dues getting accumulated which can cause multiple problems. Unpaid dues lead to a low credit score, high financial charges/penalties and could lead to a debt trap.
Use these life lines effectively and keep your credit score healthy. Being disciplined financially is useful and is not relevant only when taking a loan. Therefore, be credit-healthy and be financially responsible.
Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.