Cibil Score: Often people do not pay attention to the CIBIL score, due to which it gets spoiled. Due to this, they face difficulty in getting a loan. Every bank checks your CIBIL before giving a loan, so that it can understand whether you will be able to repay the loan on time or not. Let us know about 7 such factors, due to which the CIBIL score can get spoiled.
This is a three digit number or say a score. Its range is from 300 to 900 points. It shows your eligibility to take a loan. This number is decided on the basis of your old loan, credit card bills etc. If you keep paying all your loans and card bills, then your CIBIL score improves, whereas if you default, then your CIBIL score deteriorates. Let us know 7 reasons due to which the CIBIL score becomes bad.
1- Missing the EMI
If you already have a loan running and you miss any EMI, then it has a direct impact on your CIBIL. This reduces the CIBIL score. If you miss too many EMIs or default on the loan, then your CIBIL will become so bad that no bank will give you a loan. Every bank will fear that you will not repay its loan, which can cause it a loss.
2- Because of taking a big loan
If you have taken a big loan, then this also affects your CIBIL. This shows that you already have a lot of debt, which is yet to be repaid. In such a situation, if the bank gives you more loan, then you may not be able to repay it. This is the reason why people’s CIBIL score decreases after taking a home loan.
3- Do not apply for loan again and again
Many times a person applies to different banks to get a loan and takes the loan from the bank from which he gets the loan at a lower interest rate. Keep in mind, if you have applied for a loan in many banks, then your CIBIL score will be checked by each bank and this happens under hard inquiry. When a bank or NBFCs checks your credit score, it is called a hard inquiry. Whereas when you check CIBIL online yourself, it is called a soft inquiry. Your CIBIL score starts decreasing due to hard inquiry.
4- Making large or frequent purchases with a credit card
If you make a big purchase or a lot of purchases using a credit card, it affects your CIBIL score. This increases the utilization ratio of your credit card, which reduces your CIBIL score. You should use less than 30 percent of your credit card limit for shopping, otherwise your CIBIL score may deteriorate.
5- Credit Card Inquiry
If you apply for a credit card repeatedly, then this also affects your CIBIL. It is just like when you apply for a loan, then CIBIL gets affected. This is because in this also there is a hard inquiry, due to which CIBIL decreases. However, this is temporary and in some time the CIBIL becomes fine again.
6- Closing the credit card
If you close a credit card, it also affects your CIBIL. When a credit card is closed, your total limit decreases, due to which your credit utilization ratio increases. The increase in this ratio has an adverse effect on the CIBIL score and it decreases.
7- Repay the loan before time
If you close a loan before time, it also affects your CIBIL. Banks provide two types of loans, secured and unsecured. If you take a secured loan and close it before time, your CIBIL may decrease slightly. However, this is temporary and it gets better again in a short time.