CIBIL Score: Beware of these 5 mistakes, otherwise, you will not be able to take loans from banks, the credit score will also sink
Is your loan application getting rejected time and again? If so, find out your credit score. It will clear many things which will be related to your credit and loan. A credit score reflects your credit behaviour. This score also tells you how far you can get the loan. Agencies like CIBIL, Equifax, Highmark are credit information bureaus that provide information about credit scores. These agencies tell you about your creditworthiness and rate your credit score between 300 and 900. The details of the borrowers or credit card users are sent by the banks to the credit bureaus, after which the credit behaviour is known.
It is believed that a person's credit score should be around 750. The higher the credit score, higher will be the loan eligibility. In such a situation, the loan application will be easily passed and the loan will be released after some process. Let us know what are mistakes cause the credit score to fall and make it difficult to get a loan.
1.What happens if the loan is not repaid on time?
Failure to repay the loan on time can have a big impact on the credit score. All rating agencies keep a close watch on the dues. In this, it is seen that how easily the borrower or the person who spends with the credit card pays the dues. The bill for phone, electricity, water etc. is also seen to see how quickly it is being paid. If you delay it then it will be a big mistake in terms of credit score.
2.Multiple applications for credit cards and loans
When you apply for a loan to one bank or to many different banks, it is not considered good. This shows that your application is not being processed quickly as there must have been some lapse. What kind of loan you want and how much you want, it is seen to pass the application. For this, past credit scores are looked at. Suppose you have applied for several credit cards but have been unable to pay the old bills, then this reduces the credit score. Repeatedly the application shows that you are in great need of credit. This situation is not considered good.
3.Don't make expensive purchases on credit cards
Make expensive purchases on a credit card or spend most of its limit, but pay bills on time. If you do not pay the full amount and pay only the minimum dues, then you can fall into the debt trap. If the credit of one month is transferred to the next month, then the interest increases and due to that, your credit score falls. Therefore, always keep the credit utilization rate around 30% and pay the bills on time. Avoid making expensive purchases with credit cards. If you do, definitely pay the bill on time.
4.Credit card limit reduction
Increasing the credit card limit is good for increasing the utilization rate. Conversely, if the limit is reduced, the utilization rate decreases. You will be able to make fewer purchases with the card, which will affect the utilization rate. Assume that earlier the credit card limit was 1 lakh and the outstanding dues used to come to Rs 25,000. By reducing the credit card limit to 60,000, the utilization rate can go up from 25% to 42%. This will make it difficult to get the loan later. To avoid this, do not think of reducing the credit card limit. If the credit card does not charge more, then do not even cancel it.
5.Do not close the loan by prepaying it
By repaying the loan, you may become free soon, but its negative effect can be seen on the credit score. Especially if you have taken a secured loan. Having a loan foreclosure reduces the credit history and will not benefit the credit account much. The bank may charge you additional money for loan foreclosure. This will depend on the source of the loan and repayment money. Therefore, before foreclosure of the loan, be sure to know about its advantages and disadvantages.
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