Your CIBIL Report Can Show a Low Credit Score Due To These Reasons


As the value of credit score keeps going up, customers with good credit must work hard. To keep it and even make it better. If they want to get lower interest rates on loans and more and better credit cards.

But as you work in this direction. Be careful not to do the following things that can hurt your credit score:

Nonpayment of credit card bills and loan EMIs on a regular basis

When it comes to credit card bills and loan EMIs, financial institutions. Often favour borrowers with a track record of on-time payments. People also believe that when credit bureaus calculate your credit score. They place a great deal of emphasis on how you’ve repaid debts in the past. If you know how to read the CIBIL report, you can check it to understand the role of these payments in the calculation.

It appears on your credit record if you do not pay your credit card bill or loan payment on time. This decreases both your credit score and your credit rating. Also, payment issues of this nature tend to remain on your cibil report for an extended period of time. Which can harm your prospects of obtaining a loan or credit card in the future. This will appear each month when you check your credit score.

Ensure that you never miss or delay loan EMI payments. And that credit card payments are always made on time and in full. This would help you develop or enhance your credit score over time, which would increase your likelihood of future loan and credit card approval.

Utilizing a large portion of available credit

The credit utilization ratio is the percentage of your overall credit limit that you use each month. If you use more than 30–40% of your available credit, credit bureaus will reduce your score. This is due to the fact that lenders typically interpret this as an indication of credit expansion.

Keep your credit utilization between 30% and 40% of your total available credit to avoid a drop in your credit score. If you frequently exceed this amount, contact your credit card issuer to request a higher credit limit or to obtain an additional credit card. This will simultaneously enhance your total credit limit and decrease your credit utilization ratio.

If you do not review your CIBIL report regularly.

Even if you are well versed in how to read cibil reports, have a high credit score and wish to apply for a credit card, lenders will obtain a copy of your credit report from the appropriate credit bureau to ensure that you pay your obligations on time. It provides an overview of how you have repaid loans and credit cards in the past and currently. It is used by credit bureaus to determine your overall credit score.

Your CIBIL report may contain incorrect information if the lender or credit agency made an error, or it may have information that indicates suspected fraud if you did something you don’t recall doing. The urgency with which you must identify and correct errors and fraudulent activity on your credit report demonstrates the need to regularly checking your credit score.

You are entitled to one free credit report annually from each of the four credit agencies in India, so you should take advantage of this opportunity and also understand how to read cibil report. Ensure that you are requesting your credit report from all four credit agencies when using the facility to check your credit score so that you can receive a free report every three months.

Frequent and direct enquiry with lenders for any form of credit

If you have a decent credit score and wish to apply for a loan, the lender will obtain your cibil report from a credit agency to examine your repayment history and determine if you can be trusted. The credit bureau refers to loan originators’ queries for your credit report as “hard inquiries,” and they are reflected on your credit report. They may potentially reduce your credit score by a few points.

You might also compare lenders and select the ideal one according to your financial requirements and eligibility. People who use these services to check their credit report are deemed to be conducting “soft queries,” which have no negative impact on their credit score.

Not keeping track of accounting for co-signed or guaranteed loans.

Just like you ensure to know how to read cibil report. It is equally important to pay attention to the concept of co-signing/guaranteeing a loan. When you co-sign a loan or become a guarantor. You are equally responsible for ensuring the loan is repaid on time as the borrower. If the linked loan was not repaid on time or at all, it would have the same negative impact on the credit ratings of both the primary borrowers and the co-signer.

It’s a good idea to frequently check your co-signed or guaranteed loan accounts to determine the repayment status. If you do not monitor them, your credit score could decrease. This could make it difficult for you to obtain a loan or credit card if you need one in the future.

More unsecured loans are present in the credit mix.

Credit bureaus determine your credit score based on your credit mix. Which is the amount of secured and unsecured debt you have, as well as other significant indicators. Creditors favour borrowers with multiple secured loans, such as a mortgage, auto loan, or loan secured by a property. Because of this, credit bureaus also favour individuals with a substantial number of secured loans. When you examine your credit score, you can determine whether your credit mix has changed as a result of recent debt repayments or secured or unsecured loan applications.

To maintain a healthy credit mix after understanding how to read cibil reports. You might also substitute unsecured loans with secured loans such as a top-up home loan (for individuals who already have a home loan), a gold loan, or a loan against stocks. Pay off your unsecured debt, such as personal loans, credit card cash advances, and other similar loans. If you want to boost your credit score rapidly. This will increase the number of secured loans in their portfolio, thereby improving their credit rating.

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