Top 8 Unknown Credit Score Facts
Credit score plays a crucial role in determining your eligibility for a loan. Although you can check your CIBIL score online almost instantly, there are several factors influencing the same. Apart from these, there are some intriguing facts about credit scores that provide some valuable insight into their working. Keep reading to know them!
8 Lesser Known Facts about Credit Score
Below are some unknown facts regarding credit scores that can interest you:
- Credit Score is Unrelated to Investment
Credit bureaus do not consider the different investments that you have made while calculating your score. The main reason for this is that your investments are not quite related to your loan repayment ability. So, this information is not essential for your future creditors. Hence, the bureaus completely disregard it while assigning a score to you.
- Credit Score Varies with Credit Bureaus
In India, there are four credit bureaus, namely CRIF High Mark, TransUnion, Equifax and Experian, that perform the task of assigning credit score. However, the most intriguing fact about this is that the different bureaus consider different parameters while assigning the score. Hence, it will be essential to interconvert the scores to understand your loan eligibility if your preferred financer follows a different score from what you normally use. There are several online calculators for this purpose.
- Slightest Delay in Repayment Affects Scores
The bureaus are extremely strict about the timely repayment of your credit. So, if you are delayed by even two to three days in your repayment schedule, your credit score reduces prominently. Additionally, if you pay lesser monthly instalments than what was decided, it too has a negative impact on your score. Hence, you can set monthly reminders and plan your budget accordingly so that you can avoid any delay.
- Deleting Old Credit Reduces Scores
It is crucial that you keep your old credit reports intact so that credit bureaus can access them quickly while assigning you a score. On noticing that you have repaid your loan on time in the past, they can assign you a good score. However, if you delete these records from your report, they will deduce that you have something to hide. Also, they will not have any previous data they can refer to while assigning scores. Hence, they will assign you a low CIBIL score.
- Credit Utilisation Affects Credit Scores
Your credit card utilisation has a noticeable impact on your credit score. If you exceed your card limit every month, it projects you as a poor financial planner. Hence, the bureaus will assign you a lower score to communicate the same to the future creditor. So, it becomes essential to use your credit card wisely to avoid a negative impact on your credit score.
- Negative Score Impact Decreases Eventually
If you default on credit repayment or constantly delay in timely payment of monthly instalments, it is reflected on your credit report. However, the relieving part is that with the passage of time, the negative impact of this decrease. It does not impact your credit approval much after about seven years. So, you can efficiently utilise this time to increase your score for instant credit approval in future.
- No Credit Score without a Credit History
If you are a first-time borrower, you will not have any CIBIL score assigned to you. This is so because creditors do not have any evidence of your loan repayment, based on which they will assign you a score. So, usually, the score is “NIL” for first-time borrowers. However, you should note that once you take loan and repay them on time, you can get a good credit score.
- Tracking Credit Score Uncovers Frauds
If you keep tracking your score, you can instantly identify when there is a drop in it. Hence, on viewing the latest bank statements and going through the credit report, you can quickly identify that you have become a victim of fraud. So, you can immediately report the same to the credit bureaus and police inspectors, who can take appropriate measures to resolve it.
If upon checking your score you find it to be low, you can use some effective ways to improve the same.
How to Improve CIBIL Score
Know how to improve CIBIL score in the following ways:
- Ensure timely payment of your EMIs.
- Refrain from exceeding the credit limit every month.
- Do not apply for loan frequently.
- Maintain a balance between secured and unsecured loans.
- Review your credit report periodically.
- Avoid keeping multiple credit cards.
Once you get these insights, you can effectively use these facts for getting added advantages. You can check your CIBIL score online for free as many times as you want. However, if the lender checks the same multiple times within a shorter duration, it can negatively affect your score.
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