Banks and financial institution use CIBIL score or credit score as an indicator of an individual’s creditworthiness. RBI has made it mandatory for a lending institution to check CIBIL score and report before granting the loan.
CIBIL report carries all your basic information and complete credit history including credit availed, payment history, total applications, credit utilized etc. This detail information is used by lending institutions to understand the risk factor in lending you money and your creditworthiness.
Some key points you need to consider in case your CIBIL score is low are:
a) Regularly check your CIBIL report to keep track of the negative points and check errors
b) In case you find any errors dispute for them immediately. Financial institutions are bound to act within 30 days.
c) Making timely payment of EMI is very crucial for increasing the CIBIL score.
d) Each credit card has a credit limit, but in order to increase your CIBIL score do not cross 30% of that limit.
e) Clear off your credit card balance instead of paying interest each month and dragging the balance. Shop for only that amount which you can completely pay in next month.
Funds can be required for any purpose any time, thus, it is imperative to manage your existing debt properly in order to be eligible for more in the future. A crucial part of debt management is maintaining a high CIBIL score.
Read here completely: Help yourself to Improve your CIBIL score