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Kolkata: Whether in cricket, or in life, score is important. In modern life, the very word score conjures up the word credit score. Just as a batter is as good as his/her last score, to a banker any loan applicant is as good as his/her prevailing credit score. of all parameters that a lending institution evaluates while considering a loan application, credit score is the most significant. Often the fate of an applicant is made or marred by the credit score offered by the applicant.
Most important, it is important or all loans – home loan, personal loan, car loan and even student loan. However, when it comes to unsecured loans, the importance of the credit score of the applicant becomes paramount since an unsecured loan is granted solely on the basis of the person's creditworthiness and does not involve submission of any collateral asset. But even for a secured loan -- for which the applicant offers collateral asset -- the credit score is of significance. In simple words, a lending institutions -- a bank or an NBFC -- often takes a call on whether a person can be trusted with a loan on the basis of what the credit score signals.
Since credit score is so critical, one has to see to it that it does not dip below a point. Credit score depends on a number of factors and therefore, one can take steps to ensure that it stays at a healthy level. Here are a few important points that one must follow. These are:
If you miss a single EMI of an ongoing loan, your credit score is likely to be negatively impacted. Therefore, you should not even pay an EMI later than the scheduled date, forget defaulting on EMIs. In the event you run short of cash due to any emergency situation, you could consider seeking help from relatives, friends or colleagues, so that you can pay off your EMI on time.
These days many use credit cards and every credit card comes with a credit limit. If you exceed your credit limit regularly, the financial system will interpret it as an act of financial irresponsibility, which can adversely impact your credit score. So know your credit limit and try to stay within 30% of the credit limit that you have been allotted.
It is a non-negotiable requirement that you completely pay off any loan that you might have taken. Also pay it off within the repayment period set out at the time of taking the loan. Even if you leave a small part of a bigger loan unpaid, it will tell upon your credit score. So be extremely disciplined in repaying old loans.
CIBIL is the most frequently used credit score though there are other credit bureaus too. They obtain your credit record and constantly review and maintain your credit score. CIBIL rates you on a maximum scale of 900. Remember that any score above 750 till 799 is described as “good”. If you manage a score of 800 and above it is reckoned as excellent. Any score below 700 is low and anything between 701 and 749 is “fair”.
