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Rediff.com  » Getahead » Are you living in fear of your credit score?

Are you living in fear of your credit score?

By Abhishek Agarwal
November 26, 2015 13:26 IST
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If your answer is yes, this is just what your need to read today.

You have been told time and again that your CIBIL score must kept above 750, if you want to access timely credit. But is all this talk in the media around the need to keep your CIBIL score high creating pressure on you, so much so that you are living in fear of your CIBIL score?

Banks and the media alike are trying to hammer in information about CIBIL score among prospective borrowers. As a result, you often hear that even your loan application may be rejected if you fall short on your CIBIL score. As a result, you are so scared, that despite knowing that you must request for your CIBIL score at least once a year, you are postponing it, because you are scared to find out what you may see and what impact it may have on your plans to avail of home loan or any other credit.

If you are nodding along in agreement, here are a few things to do to dispel your fears about your CIBIL score.

Catch the bull by the horns

Yes, you read that right! You need to face your fears, by pulling out your CIBIL report. It is a fairly easy process and you will receive your report right away on your email after you have gone through the steps as mentioned on the CIBIL website and paid the fee required to access your report. Once that is done, you need to take a close look at your CIBIL score.

Needless to say if it is close to the 900 mark you have little to worry about. If it is below the satisfactory level of 750, do not panic! You need to keep your head above your shoulders and find out exactly what has been pulling down your CIBIL score.

Chalk out a plan

If your CIBIL score is low because you have not made regular repayments on your credit card or some other loan, fix that immediately. Examine your finances and see where you can cut corners. If possible, try and liquidate some assets to repay your credit card debt first.

Credit card debt is the most expensive form of debt that you are servicing and the rate of interest you are paying on it can be as high as 38-40 per cent. Therefore do what it takes to repay this debt first. Once you have repaid this debt, ensure that you do not repeat the mistake of going overboard with your credit card, and pay your outstanding debt in full every billing cycle.

Raise a dispute if necessary

If your CIBIL score is low even after you have maintained an impeccable repayment track record, check if there is something amiss in your CIBIL report. For instance, you may have closed a loan account from your end successfully, but the bank in question has not forwarded the relevant details to CIBIL.

As a result your CIBIL score is taking a beating for no fault of yours. In cases such as these, raise a dispute with CIBIL right away. CIBIL has an efficient grievance redressal mechanism that will resolve your dispute as soon it can after it has verified the relevant details with the lender in question.

Once your dispute has been resolved, your score will be restored to normal within a short while.

Relax! It's just a number

At the end of the day, your CIBIL score is a yardstick of your financial health. Of course you must make an attempt to keep it high, but don't revolve your life around it. Instead try and build up healthy financial habits. First things first draw up a financial plan, save for emergencies, buy adequate insurance cover and invest your surplus.

As far as credit is concerned, don't reach for the moon right away. Start small with a credit card and make purchases that you can repay in a single billing cycle.

Also inculcate other good credit habits such as keeping your utilisation levels under 30 per cent. If you follow these good financial habits, your CIBIL score will automatically get a boost. The moot point, we are trying to make here is that your CIBIL score is a reflection of your financial habits, so work on getting them right first.

Having a good CIBIL score definitely puts you at a vantage point. You can not only negotiate with banks when you need credit, your loan application and due diligence process will be considerably shorter. So do not live in fear of your CIBIL score.

Inculcate good financial habits, and be rest assured that your CIBIL score will remain high!

Photograph: carnagenyc/Creative Commons

The author is Co-founder and Director Credit Vidya.

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Abhishek Agarwal