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What factors pull down your CIBIL credit score?

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As Indian economy is developing, our dependency on credit is also increasing. With increasing dependency on credit, it important to the factors that pull down an individual’s credit score.

Consider a personalized credit score to be like 10th class examination. Just like how you get an admission in a reputed college if you score well, a good personalized credit score could get you loans at a cheaper interest rate. So to keep yourself within good score limits, it is important to know what brings down your score so that you can avoid them.

1) Untimely credit card payments: Do not delay your credit card payments. If you do, it shows as an overdue (Days Past due – DPD) in your credit score. This is not something that lenders are happy to see. Not making timely payments on your credit card shows that there is no discipline on your part to make repayments.

2) Keep your credit card debt low: If you have a limit of Rs 1 lakh, stick to it or keep it even lesser. Do not shoot the limit every now then. It gives an image to the lenders that you are heavily dependent on debts or overleveraged.

3) Make full payments: Every month your credit card statement shows minimum amount due. Just because you have an option to pay minimum amount due does not mean you should use. Pay your total amount due. It is healthy, and you also avoid paying extra charges such late payment fees, interest and service charges.

4) Loan closures: You may have paid off your previous loans. But unless the loan account is closed, it does not show as the loan has been paid off in your credit score and it may bring down your score. Follow up with your loan officer; ensure that the loan account is closed. Make sure you collect a copy of loan closure letter or a no-due certificate and keep it safe, for you never know when you will need them.

5) Defaults: Any kind of payment defaults could bring down your credit score. Be it credit card, personal loan , car loan or home loan. “These days default on a consumer loan is also taken very seriously,” said a senior bank official with Axis Bank’s lending department. While loan defaults could bring down your score by 150-200 points, a credit card default could bring down your score by 100 points. They depend on the size or value of defaults. Also say no to “Settlements” especially on your Credit cards, the derogatory flag on settlement will impact your credit score.

Creditvidya.com is a leading credit management company. All information in this article has been provided by Rajiv Raj, Director & Co-Founder, CreditVidya.

  • Deepali Mohite

    Your CIBIL credit score evaluates your credit worthiness. You might be paying your bills on times, it is not the only factor that affects your credit score. Here are some surprising things that could affect your credit score

    - Cancelling your credit cards
    - Not using your credit cards
    - Not applying for loans
    - Unaware about your credit score
    - Requesting to increase your credit limit.

    You can view your credit score for free by visiting http://www.freescoreindia.com/credit-score.html

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