Importance Of Your Credit Rating

In today’s era, where obtaining loans and credit cards is becoming increasingly difficult, the importance of credit score cannot be overlooked. Since many financial institutions and other companies are also using a candidate CIBIL score as an influential benchmark for their recruitment, you have all the more reason to worry about your CIBIL score.

Your CIBIL score is a three figure rating which is based on your credit history, pending debt, payment behaviour, and other factors. The score is regulated and standardised by CIBIL, which is the most popular credit bureaus of India.

Here are a few reasons that show why your credit rating is important:

Loans and Credit Cards

One of the most prominent influences that your credit rating will have on your life would be during loan and credit card applications. Almost every financial institution today dismisses the applications of the customers who have a low CIBIL score.  Since most of them consider the CIBIL score, in comparison to other forms of credit score offered by other credit bureaus, you would want to have a score between 500 and 900, at the very least. If yours doesn’t come in that bracket then unless you improve credit score you will face several rejections.

Interest Rates

Generally, the lower is your credit rating, the higher will be interest rates that you will have to settle for, which is when a bank approves your application in the first place. As harsh as it may sound, if you think about it, it makes sense.  A bank or NFBC takes a risk when it provides a loan to someone, and if the person’s credit history lacks credibility then it is only fair that they balance it out by changing a higher interest rate than the usual. Thus, if you want to enjoy attractive rates then it is a must that you have a good credit rating.

Job Eligibility

Your credit rating can also have an impact on your job applications. More than a few banks have already started making in mandatory for the candidates to have high creditworthiness in order for them to apply for jobs. For instance, in a job advertisement some time back SBI specifically mentioned that only those candidates could apply who had never defaulted on a loan. Many other banks have also followed suit, and the pattern is also making its way to non-financial companies as well.

To ensure that you don’t have to face problems when you need a home loan, student loan, or credit card in the future it is must that you keep credit report and the score in good shape. Here are a few tips that can help you with the same:

  • Monitoring: Prevention is often the best solution for a problem, and maintaining a credit score is no different. By checking your credit score from time to time, you can be aware of potential problems before it becomes too late. If you notice that your score is dropping then you can check your report and find out the reason behind it. By taking care of the problem you can improve CIBIL score. Frequent report monitoring can also help you find discrepancies, rectifying which will also increase the score.
  • Regular Payments: Nothing will help in building a high credit score as much as making timely payments for your loans and credit cards. The habit has two benefits- 1) You score is improved. 2) Potential lenders will feel comfortable with your application, and trust you easily. Thus, getting a loan or credit card in future won’t be a problem.
  • Low Credit Utilization: While a credit card offers several benefits, it is important that you use it wisely. A lot of people tend to use credit card more often than they should be. Even though you feel you can you use as much credit that is allotted to you through the card, if you use a lot of credit then it can be detrimental to your credit score. Ideally, your credit utilization ratio should not exceed 30%.

If you want to safeguard your future, then it is important you start taking your credit rating seriously. Every activity related to your credit utilization can affect your score, which is why you should spend your credit wisely, and responsibly.