Manage Your Credit Score

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 the 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 is your current CIBIL TransUnion Score?

You can know your score by accessing it from CIBIL along with your CIBIL CIR for Rs.450. The payment can be made by following an online payment procedure or through a Demand Draft. You will have to submit your own identity proof and address proof documents along with the application form and online payment receipt or Demand Draft.

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. Majority of the score is made up of the following factors:

• Credit Utilization: How much credit is the consumer using?

• Defaulting: How many accounts are past due – how much and by how many days?

• Number of enquiries: Has the consumer applied for additional credit lines?

• Trade Attributes: How old are this 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?

While now 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:

• Pay your loan EMIs on time. If you have more than one loan running, it is prudent to track it well. Make regular & timely re-payments of your loan to maintain your credit level

• Never fail to pay the minimum payment on your Credit Card. Credit Card is categorized as revolving credit and it helps in building a good credit score if payments are regular.

• Do not apply for loans or credit cards if not required, as this would mean more credit exposure. This could affect your credit score.

• Use some of your savings to repay some of your debt. Always plough back extra income to reduce your debts.

• 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 scope for improvement. 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!

(Author Harshala Chandorkar is a senior Vice President – Consumer Relations, CIBIL)