Credit Score decides your credit value and assists a bank to make a decision that you can get a credit card or loan or not. The Credit history of an applicant is essential in finding out the CIBIL. The credit score ranges from around 300 to 900 and the people who have a minimum 750 score, get a loan approved easy and quick.
The Credit score actually lays a direct effect on the financial life of a person. A good score shows a reduced risk of payment failure and a low score indicates a high risk of non-payment.
Now, you can easily get check your credit score online for free!!
Skipping the payment due dates
The failure of payment on the credit card due date or you can even say it like not paying the monthly installments on time, puts an extremely negative effect on your credit history. No matter if you pay all the EMIs on time, but just one missed payment can actually have a bad impact as it will definitely reflect in the records, as the skipped installments and delayed duration gets indicated in the credit history.
Therefore in case, your CIBIL is at a low level due to payment failure or late payments, then it is high time to get back on track with your payments on time. And, to improve your score, it will take you a minimum of 6 to 8 months to improve the credit record.
Well, you can calm down as at the time of evaluation of a person’s credit record, just the credit card bills are taken into consideration along the monthly installments and loans. Moreover, any other bills are not considered for checking the credit report.
Unlike various nations in the West, the banks in our country until now have not added the utility and other general regular bill payments for credit score calculation.
Keeping up the credit usage ratio
Credit usage can be described as how much money is used from the allotted credit limit. Well, It is evaluated in terms of percentage. This ratio is measured on the basis of the entire credit limit offered on all the cards you are using at present.
The banks and financial institutes give preference to the loan applicants who have a credit utilization ratio that is below 40% of the entire limit. So, it is secure and better to assume that the lesser the ratio, the higher will be the credit score. This ratio can easily be improved by habitually paying off the credit card bills on time and keeping away from the over usage of credit card limit offered by the bank.
The next essential point that the applicants require knowing is the ‘EMI-to-Income Ratio’. This point is evaluated as the EMIs and credit card payments divided by the person’s income. The general criterion says that the highest EMI-to-income ratio is about 50%, as the banks consider that the person will require half of the salary for his survival.
Say no to the frequent increase of credit limit
Even if an increased credit limit on the card provides much flexibility to acquire more balance, this can actually have an impact on the credit score in case not utilized sensibly. The financial institutes and banks attempt to measure the net value of the applicant before giving approval for any loan. The common increase in a person’s card limit could be considered as a symbol of being reliant on the borrowed money to deal with daily living expenses, and this absolutely raises a danger sign for a bank.
Therefore in case you are dealing with these issues and need to get it all sorted soon, then just be careful about using your plastic money in a sensible way.