9 Bad Credit Behaviours to Avoid to Maintain a Healthy CIBIL Score

Do you know how the CIBIL score is affected? Non-payment of credit card bills and EMIs is not the only factor affecting CIBIL score. Many other factors leave a direct or indirect impact on your CIBIL score. It falls in the range of 300 to 900, and you need at least 750 points to secure a good deal on loans.

The importance of the CIBIL score is immense as it determines your creditworthiness to creditors. Let’s learn how to maintain a good CIBIL score.

9 Critical Factors Affecting Your CIBIL Score

If you pay attention to these 9 factors, you can maintain a shining credit score. Check them out!

  1. Applying for Multiple Credit Cards & Loans

When you apply for a credit card or a loan, lenders run a hard enquiry on your profile. These hard inquiries adversely impact your CIBIL score, making you look desperate for credit. Wait for some time to apply for another credit or loan if your credit application has been rejected recently.

  1. Outstanding Dues

Keeping your due payments pending is a sure-shot way to reduce your CIBIL score. It doesn’t matter whether your outstanding payment is small or considerable. It reflects in your credit score once it crosses its due date. So either use an automated payment system or keep a note in your diary. But pay all your dues on time.

  1. Irresponsible Repayment Track Record

It is easy to guess that if a payment beyond the due date reflects poorly on your CIBIL score, then what kind of damage consistent late payments or non-payments can cause to your CIBIL score. This kind of track record is one of the most significant factors affecting CIBIL score adversely.

  1. Request to Increase Credit Limit

A request to increase the credit limit shows your inclination towards living off the credit. Therefore, don’t increase your credit limit unless you need it or apply for a moderate increase. It can be even worse if your request to improve your credit limit is rejected, looking at your credit history.

  1. Owning no Loan

Suppose you are not repaying any loans but have a lot of credit cards. That also goes against your credibility. Some loans, such as a home loan or a consumer loan, are good to uplift your CIBIL score, provided you are paying your EMIs regularly.

  1. Being Suspicious Regarding Credit Card

Not paying credit card bills is not the only way the CIBIL score is affected. Not using your credit cards can also negatively impact your credit score. If you are also the one who is afraid to use your credit card because you think you will spend beyond your affordability, then you are indirectly hurting your CIBIL score.

  1. Spending Too Much Through Credit Card

Using too many credit cards is counterproductive. It gives an impression that you are credit hungry and can’t spend from your pocket. So don’t underuse or overuse your credit limit. A 30% credit utilisation ratio is considered ideal. Try to keep your credit card expenses in that bracket.

  1. Paying Only the Minimum Amount Due

Paying only the minimum amount due increases your debt trap and the compound interest on your outstanding balance. Always try to pay your credit card bills in full or at least pay a higher amount than your minimum due amount. Only paying the minimum amount reflects irresponsible credit behaviour.

  1. Not Having a Credit Mix

A healthy mix of secured and unsecured credits is one of the major factors affecting your CIBIL score positively. It shows your experience handling both types of credits, and the regular repayments increase your CIBIL score. For instance, a home loan with a credit card is a good credit mix.

If you understand the importance of the CIBIL score, you will definitely avoid the 9 destructive credit behaviours mentioned above. Also, follow the correct credit practices such as timely paying all your dues, not taking too much credit, and maintaining a credit mix to enjoy a healthy credit score.

This way, you don’t need to worry about being rejected for a loan or not getting it on favourable terms.

Author persona: Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters, and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at [email protected].