Five Financial Habits that are Good for Your Credit Score

Lenders approve loans depending on the applicant’s creditworthiness. It’s quite a simple process. All lenders—banks and non-banking financial companies (NBFCs)—keep an eye on the credit score of the borrower. And the only way to do this is by getting to know about the applicant’s credit history. It is important for them to know whether the applicant has ever defaulted on repayment. Also, it is important to know if the person has financial discipline and clears credit card dues on time. From the lender’s point of view, it’s like asking, ‘Am I lending money to the right person?’

Enter CIBIL Score

TransUnion CIBIL Ltd is a credit information company. It aggregates consumer borrowing information about individuals and businesses. It has a database of about 60 crore Indians. It serves as the common reference point for all lenders to check the borrower’s credit score. The thumb rule for a lender is to cross-check the CIBIL score, which reflects an applicant’s creditworthiness. Simply put, if your CIBIL score is good (more than 700), you have a good chance to see your loan application through.

Why a Good Credit Score is Important

A good credit score helps you get a loan online easily. A host of financial service companies is willing to grant loans only if you fit the bill. Getting loans from nationalized banks, though, will not be very quick, as it involves a lot of paperwork.

So, if you need a loan very quickly, you can approach a private sector bank or a non-banking financial company (NBFC) like Bajaj Finserv, which has a wide array of loans to suit your needs. What’s more, you can check your eligibility on the company’s website at once. All you need to do is fill in a few details about your income, net payouts every month, and the like.

But, to stand a good chance of seeing a loan application through, you need to be disciplined with money matters. So, here are five such habits to keep your CIBIL score healthy.

1. Pay Your Dues On Time
Make it a habit to clear your equated monthly installments (EMIs) or credit card dues on time. If you have chosen the electronic mode of paying EMIs, set it on a date when you are most comfortable. For clearing credit card dues, make it a point to make the payment two or three days before the due date every month.  

2. Leave Headroom For Credit Limit
Credit cards come with credit limits. There is a cap on how much the card issuer would like you to spend. Always keep a headroom for credit. For example, if your credit limit is Rs. 50,000 a month, do not exceed Rs. 30,000. You may argue that you are very much within your limits when you spend Rs. 45,000 on your card, but CIBIL will see it as a negative trait and it will reflect poorly on your credit score.

3. Not Using Too Many Credit Cards
Flaunting credit cards is not a good habit. If one does the job for you, restrict yourself to that. More cards mean more chances of falling into the debt trap.

4. Checking The Credit Report
Keep a tab on your credit report. This will give you an idea about whether you are showing financial discipline. If not, it can help you plan better. You can log on to netbanking to gain immediate access to your credit report.

5. Staying Away From Unnecessary Credit Applications
Just because a lender rejected your loan application does not mean you should try your luck with others. The more you apply, the lower goes your score on CIBIL. Instead, it could be a good idea to introspect and set things right before applying for a loan again.

The Last Word

Getting a loan is not as difficult as it is made out to be. In fact, loans can be quite hassle-free if you watch your step. A few financial habits are worth cultivating from early on to keep your credit score healthy. It will give you enough chances to grab a loan—especially at a time you need it the most.

Must Read: Golden Rules to Remember for Bettering your Credit Score