As a new entrant into the world of your own money and credit, here’s a quick primer about the basics to establishing a good credit record. Firstly, what is credit? Put simply, credit is a loan. The kind of credit you can get will depend on your CIBIL score. The higher it is, the more creditworthy you are from a lender’s perspective. So, what is it? Your CIBIL score is a three-digit number that a lender looks at to assess how risky a borrower you could be. The higher your score, the better your access to being approved for loans/cards and competitive interest rates. Your CIBIL score is also backed up by a CIBIL report - a detailed summary of your credit profile, access and repayment history, credit accounts, and balances. Logically, a clean and prompt payment history delivers a better score, and vice versa.
CIBIL Score, CIBIL report, access to credit, why are all these concepts important anyway? Because credit today touches nearly every aspect of our lives – from buying a home, starting one’s own business, or enrolling for higher education. Relying on credit is now a way of life and it’s tightly woven into our spending patterns.
Let’s dive in now into the ways by which you can get off to a good start on your credit profile.
Once you have established a credit footprint, make sure you follow healthy credit habits to maintain a positive credit profile for continued credit access.
Too few credit users take full advantage of the information contained in their CIBIL profile. Having a good grasp on your credit information and checking your CIBIL score and report regularly can help you get ahead in life and save you time and money. This is called Credit Monitoring, and monitoring your CIBIL Profile frequently helps you stay informed of any changes to your profile. Such as, new accounts being opened in your name, a credit card balance increase, or an overdue payment reported by one of your creditors. This practice keeps you well informed and aware about the health of your credit profile, and it’s a great habit to develop early on.
A lender typically performs a hard enquiry to assess your creditworthiness every time you apply for credit. Multiple and frequent hard enquiries by lenders may negatively impact your CIBIL Score. By applying for credit only when you need it, your score remains stable the rest of the time and presents an overall view of a responsible credit user.
Don’t avail the option of part payments and get into the practice of racking up interest on the unpaid bill. It’s harmful to your score and the interest burden can become wildly expensive in the long run.
Building a healthy credit profile is like running a marathon. Regardless of the methods you choose, remember consistency is the key. By following a carefully planned roadmap, you can move several steps towards creating your credit footprint and becoming credit-worthy.
Stay credit-ready by monitoring your CIBIL Score & Report.
Disclaimer: The information posted on this blog (Information) is prepared by TransUnion CIBIL Limited (TU CIBIL). This Information is for generic informational purposes only and is meant for consumer education and awareness about credit scores, credit history and credit reporting. The Information posted on the blog does not constitute credit advice and the user will need to consider the same and take independent informed decisions . No part of this Information may be quoted out of context, distorted ,distributed, published and/ or reproduced in any form and manner whatsoever. Consumers are advised that the Credit Information Reports (CIRs) prepared by TU CIBIL are based on collation of information, substantially, provided by credit institutions who are members with TU CIBIL. TU CIBIL is not responsible and /or liable for errors and/or omissions caused by inaccurate or inadequate information submitted to it by credit institutions. TU CIBIL does not guarantee the adequacy or completeness of the Information and/or its suitability for any specific purpose nor is TU CIBIL responsible for any access or reliance on the Information. TU CIBIL expressly disclaims all such liability. Further, this Information is based on the data available with TU CIBIL at the time of publication and therefore may not be up-to-date.