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Don't Sweat it. Easy Hacks to get a Healthy CIBIL score this Labor Day

Wednesday, April 27, 2016 by Rajiv Raj

cc209n109Check the Credit Limit: Your credit card limit is Rs. 100,000 and you run a bill of average Rs. 70,000 per month but you manage to pay it all on time so there is no problem; right? Wrong!

Credit utilization ratio is a ratio between the total available credit limit available to a person and what he/she utilizes per month. A high credit card ratio even if you are able to pay it on time is not good for the CIBIL score as it is an indicator of credit hungry behavior. There are two ways of dealing with this; the first obviously is to lower the credit card spending and the second could be to get a bigger credit limit. One can get in touch with the existing card issuer and get the credit card limit enhanced; this is possible if the card holder is eligible for a bigger credit limit. If this is not possible then one could explore the option of getting another card issued, this will increase the overall credit limit available and the user can spread his/her expenditure across both cards.

Remove the Irritants from the CIR: Sometimes there are some old issues that we seem to have forgotten but unfortunately (for us) Credit Information Report (CIR) continues to remember it and carries it forward. These could be an issue like an old credit card due which was not paid and has since then grown bigger due to fines and charges being levied over and over again or it could be an open loan which has been paid in full but an NOC has not been taken. Sorting out any such issue may take time and requires patience but removal of any such irritant is bound to have an immediate positive impact on the CIBIL score.

Check for Mistakes:  There are times when the cause of a low CIBIL score may not be your own mistake but a mistake by some other agency. This can be detected only if one scrutinizes their credit report carefully. Just point out the mistake to the credit bureau and they will do the needful and get in touch with the required agency to remove the error from the CIR. There is simple mechanism available both online and offline for removal of any mistakes from a person's CIR.

Avoid Making Unnecessary Loan Enquiries: This is not something that you should do but something that you should not do! Do not make any loan enquiries till you are sure that you require a loan and till you are fairly certain that you meet the required terms and eligibility criteria laid down by the lender. When any loan application is made, the prospective lender seeks the applicant's CIBIL Report; this is known as a hard enquiry and impacts the CIBIL score negatively. A loan rejection means that one has to apply for a loan again which will generate another hard enquiry. Finding out about a bank's polices for loan sanction is not difficult, if you really need a loan then apply to a bank where you are likely to get the loan sanctioned. Not being credit hungry is good for credit health!

Nothing Beats Paying on Time: This is the simplest yet the best and almost the most important aspect to be credit healthy. This cannot be a onetime effort but it has to be a habit; being disciplined in payments goes a long way in keeping the score in the green. A delay is generally due to being forgetful or lacking discipline so set up reminders, put in auto debit mandate, use post its or whatever it takes but do not delay payments.

So hopefully this Labor Day you can get a good credit score or you can at least strive towards one by following one of the above simple yet effective ways. 

MadanRajiv Raj

Rajiv is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India’s first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.

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