Since the growth of the credit information industry, the only implemented generic scoring model that has been introduced and is being used extensively by lenders in India is the Cibil TransUnion Score.
Through advanced analytics, this score assigns a number from 300 to 900 to a borrower based on the credit history. The higher the numerical value of the score, the lower is the risk associated with the individual. Here is how you can manage your credit score for deriving maximum benefit for accessing credit and developing this vital reputational collateral.
Almost all the credit institutions in India use the Cibil TransUnion Score while deciding on the loan application of a consumer. It is, therefore, imperative for you to access your credit score before applying for a loan to get a precise understanding of your credit standing and the likelihood of the loan approval. This will enable you to see yourself as loan providers do and make prudent borrowing decisions. Therefore, as a first step to managing your credit score, it is imperative to know what your current Cibil TransUnion Score is.
You can know your score by accessing it from Cibil along with your Cibil CIR for . 450. The payment can be made by following an online payment procedure or through a demand draft. Along with the application form and online payment receipt or demand draft, you will have to submit documents as identity and address proof.
Once you have accessed your score it is important to review it and understand how your credit score has been derived.
Your Cibil TransUnion Score is calculated based on the information in the "accounts" and "enquiry" section of your Cibil CIR. A majority of the score is made up of the following factors:
CREDIT UTILISATION:
How much credit is the consumer using?
DEFAULTING:
How many accounts are past due date – how much and by how many days?
NUMBER OF ENQUIRIES:
Has the consumer applied for additional credit lines?
TRADE ATTRIBUTES:
How old are the consumer's lines of credit? What type of credit does he have? Does the consumer have a good mix or balance of credit or is it all credit cards?
Now that you know your score and the broad factors that determine the credit score, it is imperative to understand how to manage your credit score. Here are some ways to make sure that you are being financially disciplined and, thereby, maintaining a healthy credit score:
EMIS:
Pay your loan EMIs on time. If you have more than one loan running, it is prudent to track it well. Make regular and timely re-payments of your loan to maintain your credit level.
CREDIT CARD:
Never fail to pay the minimum payment on your credit card. Credit card is categorised as revolving credit and it helps in building a good credit score if payments are regular.
CREDIT EXPOSURE:
Do not apply for loans or credit cards if not required, as this would mean more credit exposure. This could affect your credit score. Instead of applying for another loan, try checking for a top-up loan option on your existing loan. This will make your debt burden easier to manage.
REPAYING DEBT:
Use some of your savings to repay some of your debt. Always plough back extra income to reduce your debts.
REVIEW:
Review your credit history and credit score frequently, throughout the year.
For maintaining a good history and subsequently a worthy credit score, you should ensure that you are always in control of your finances.
Remember, a good credit history results in speedier access to credit. It is beneficial to both the credit grantor as well as the borrower.
However, if your credit score is low, don't be disheartened. The credit system always gives chances to improve. You can start improving your credit score by simply paying off your debt and not opting for more until your score improves. Better late than never!
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