Page 35 - Banking Finance September 2019

ARTICLE

Benefit of Higher Credit (CIBIL) Score to

Individuals:
Y A high score in the credit information report signifies
higher credit worthiness of the customer
Y Higher the CIBIL score more will be the chances of
future loan approval.

Y Pre-approved loans and credit cards facilities may be
offered by leading lenders.
Y A good CIBIL score allows you to negotiate a
competitive rate.
Y A good credit report can get a loan approved faster.
Y A credit score of more than 750 is typically considered
1. Late Re-payments: Late payment of EMIs of loans or
to be a good score and is most likely to be eligible for
Payment of Credit Card Bills after the due date affects
sanction of a loan. the credit score of a person and it reduces the credit
score significantly.
A strong credit report that will enable you and your spouse
to get the credit you want while a poor credit report may 2. Higher Credit Limit utilization: Higher or Maximum
affect married life and a wonderful moment in life. utilization of Credit Limit of Credit Card is seen as sign
of credit hungry and mismanagement. This may also
A bad credit score could potentially mean higher insurance lead to lower credit score.
premiums, rejection from a landlord to rent a house or even 3. Factual error in credit report: If there are any factual
losing the job you wanted. errors in your credit report, the mapping of data may
not happen. This may also result in wrong credit score.
Benefit of Credit Report to Banks & 4. Frequent Change of Credit Cards: Good Credit Score
Lending Institutions is build-up on long credit history. Once a credit card is
closed the history will be removed from your credit
CIR helps financing institutions in following ways:
report after some time. Due to the thrashing of the
Y To check the credit history and track record of loans
taken and repayment done by a customer accounts there is a probability of dropping of your credit
score.
Y To assess the customer's capacity to service the loan
5. Frequent Enquiry of Credit Score: Whenever any
Y To obviate chances of multiple financing person applies for credit card or a loan, the lender
Y To cross check important personal details furnished by fetches the Credit Score of the applicant to make credit
the customer in the loan application decision. Every time, there will be a slight drop in the
score on account of enquiry for lending purposes by
Y Score predicts the likelihood of delinquency on one or
more loans in the next 12 months. Banks and Financial Institutions. If you apply for credit
with multiple lenders they will all enquire your credit
Y The higher the numeral value of the score, lower is the report and accordingly there will be drop-in credit score.
risk profile of the individual.

Y It helps the Credit Decision making officials in predicting Ways to improve Credit Score:
the future financial behaviour of the prospective There are many ways to improve credit score of an
borrower individual. If your credit score is below the excellent credit
range then it can be improved by making a few changes in
Reasons why your Credit Score Drops your credit handling ways. There are a few common habits
There are many reasons of dropping of a person's credit that will help you in improving your credit score. Some of
score. Some of the main reasons are as under: the following are a few tips for improving the credit score:

BANKING FINANCE | SEPTEMBER | 2019 | 35