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Credit Card Utilisation and Its Influence on CIBIL Scores: Dos and Don’ts

Effectively managing your credit card is like skillfully riding a financial roller coaster, with its fluctuating highs and lows. It is important to remember that your CIBIL score can be greatly affected by your credit card use. A CIBIL score, often known as a credit score, is a numerical indicator of your creditworthiness. It is of utmost importance when you seek loans or credit. This article will guide you on the dos and don’ts of maintaining a proper CIBIL score. You can use the CIBIL score app to check your CIBIL score. Also, various websites provide free CIBIL score check

Ways to Improve CIBIL Score

To begin the process of constructing or enhancing your CIBIL score to easily access credit facilities with additional advantages, adhere to the following prescribed steps:

Avoid Late Payments

It is crucial to ensure timely repayment of any loan or credit card EMIs since any delay will directly affect your CIBIL score. Individuals can utilize auto-pay functionality to prevent late payments, establish reminders, and create a monthly work schedule. 

Check Your CIBIL Report for Errors

This crucial component mostly influences the credit score. Individuals can verify the accuracy of their credit report and identify any erroneous or misleading information included within it. If there is any inconsistency in the name or a changed address has not been updated, one can initiate a disagreement to fix the issue(s). Engaging in this exercise assists in the enhancement of your CIBIL score. With the help of the cibil score app, you can check whether any error is present. 

Lower Your Credit Utilisation

Individuals using credit should ensure their credit utilization ratio remains below 30% of their available credit limit. Achieving this level involves dividing the financial load of expenses among numerous credit packages. Reducing your credit utilization ratio can help you establish and sustain a good credit score, thus enhancing your financial security. Avoid exceeding 80% credit utilization since it indicates a strong need for credit and may lead to credit application rejection. A free CIBIL score check will also facilitate you checking the credit utilization you are making. 

Maintain a Healthy Credit Mix

Unsecured debts, such as personal, business, and student loans, are commonly seen as a primary cause of decreased credit scores. As such, unsecured loans are made without any security, the risk is much higher than secured ones–say, a mortgage or car loan. A diverse choice of credit options is, therefore, helpful in maintaining a satisfactory score. This helps balance the risk level involved, resulting in an improved credit score. A diverse portfolio of credit does not pose a concern to banks since it prevents the applicant from being perceived as a high-risk borrower.

Avoid Enquiries in Short Duration

Avoid applying for many credits concurrently, as this demonstrates your eagerness for credit to the lenders. A credit inquiry will occur each time a loan application is filed. Submitting loan applications frequently harms lending organisations’ perception of the applicant, leading to an increased likelihood of loan refusal. Hence, only seek new credit when it is necessary.

Avoid Exhaustion of Credit Limit

Use the CIBIL Score app to check the credit limit. It is advisable to refrain from utilizing your whole credit limit since doing so will increase your credit utilization ratio, ultimately decreasing your CIBIL score. If the costs are stressing the current credit line, one might request the bank to enhance the credit limit.

Do Not Close Old Accounts

Closing your previous accounts or credit cards is not advisable, as doing so indicates your long-standing relationship with the bank and demonstrates your lengthy record of timely repayments. Terminating old credit cards or accounts erases your history with the bank, adversely affecting your credit score. Free CIBIL score check will provide you with information on linked accounts. 

Supervise Your Loans that Have Been Co-signed

Monitoring any loan to which you have served as a co-signer is essential. Once in a while, the borrower may not be able to pay you back due to unexpected financial circumstances of which you perhaps did not know. Your credit score is the sole aspect affected by missed or delayed payments. Monitoring the loans for which you have acted as a co-signer is advisable.

Conclusion

Effectively monitoring your credit card use is crucial for keeping a favorable CIBIL score. By adhering to these guidelines and avoiding these mistakes, you may navigate the fluctuations of credit with assurance and maintain a positive financial trajectory. With a free CIBIL score check, you can manage all your finances more effectively. 

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