Do You Understand Your CIBIL Score Report? Here's A Detailed Guide

A CIBIL Score Report is one of the important documents for good financial health. Therefore; in order to ensure your financial well-being, it is important to get your credit report of CIBIL reviewed periodically. However; once you have your credit report with you, it can become a daunting process to understand the information provided in it. 

What All Details Goes Into That Makes Your CIBIL Score Report 

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To build and maintain a good CIBIL score report you need to understand what goes into that builds your credit score. Below are few significant facts that make your CIBIL score report:

1.Your repayment history

One of the main constituent of your CIBIL score report which contributes about 35% of your score report. The ground rule says if you wish to have score more than 750+ make sure to do timely repayments. It is advisable to automate the process.

2.Understand what goes into the making of CIBIL score

To build and maintain a good CIBIL score you need to first know what goes into making it. So here are the things that make your CIBIL score:

3.Credit utilisation ratio

This is another important constituent of the CIBIL score and contributes to 25% of its constitution.

To explain in simple language, the credit utilisation ratio is nothing but the total amount of credit you use as opposed to the total amount of credit you have been authorised. Financial experts suggests that an individuals should always try and keep your credit utilisation ratio at 25 to 30 % to maintain a good CIBIL score report.

4.How old is your credit

The age of your credit is another primary factor that influences your CIBIL score report. It contributes about 15%  of your score report.  Although; an individual is not expected to have a long record or credit history right from the start it is important to make timely repayments on your credit cards. Having multiple loans as well as credit cards are not good for your CIBIL Score report.

5.The mix of debt

This is a factor that contributes 10 per cent to the constitution of the CIBIL score. It is advisable to maintain a good mix of secured and unsecured lines of credit in order to gain brownie points on this factor.

6.The number of inquiries that your lenders make

You may be surprised to learn that each time you make an application for a new loan or a credit card, the concerned lender makes a request for your CIBIL score and report. This is what hard inquiry means. Each time there is a hard inquiry on your CIBIL score report, your CIBIL score takes a hit.

Too many hard inquiries make an impression that you are credit hungry and will make any lender wary of giving you a loan or a credit card. Therefore; unless and until you absolutely need a credit card or a loan, do not apply for one.

7.Choose your first credit card well and avoid further temptation

Credit cards come loaded with a lot of rewards, cash benefits, and offers but; those are not the only factors that should influence you to get your first credit card.  Make sure you carry out good amount of comparisons and choose the best credit card in terms of interest rates, fees and rewards that are most relevant and significant to you. Once you have taken your card, your temptation test begins.

While it may seem easy to get carried away and overspend on your card, bear in mind that spending beyond your means is the first thing that leads to a debt trap. Therefore; the ground rule of using credit cards is never to buy anything on the card that you cannot afford to pay back in cash over the billing cycle.

Final Thoughts

Building and maintaining a good CIBIL score report, is no rocket science but; young people tend to fumble in their credit usage and that does considerable harm to their CIBIL scores. If you are conscious about your physical health and do everything possible to keep in ship shape, maintain financial discipline and you will see that your financial health is in order too.

Besides armed with a good CIBIL score you are most likely to get a loan or credit card whenever you are in need of one.

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