Did you find your credit score to be on the lower side when you last checked your CIBIL score? It sometimes can be hard to figure out what factors have reduced your credit card score. Nevertheless, it is important to figure out the reasons.
Lacking a good CIBIL rating can hamper your financial planning in the longer run. For instance, a poor credit score can affect your ability to take loans, apply for credit cards, and result in higher insurance premiums.
Here’s a list of three factors that contribute to a poor score.
1. Not Paying Your Bills on Time
Late payments of your bills lead to a poor score. It’s not just late payments of your credit cards, but utility bills, and loan EMIs as well. Also, paying just the minimum, less than the minimum, or withholding payments in case of a dispute is not recommended. Some people continue to use the card despite a payment dispute with the bank. You don’t yet know the result of the dispute and in case you aren’t successful, you will owe the bank the full amount and likely have the interest charges to pay as well. In that case, your credit score takes a hit.
Therefore, it is advised that you make sure that you pay your credit card bill on time before you next do a free online CIBIL score check.
2. Discontinuing a Card with Higher Credit Limit
Closing a card with a higher credit limit goes on to have a significant impact on your CIBIL score, as it continues to show in your credit score history. Sometimes, people think that since they have had a positive credit score for a good time, it still has a bearing on their credit utilization scoring factor, however, the opposite is true. You can remedy it by closing the account, in this way it will no longer appear in your credit history.
3. Applying for Too Many Cards at Once
Beware of applying for all those hard-to-qualify-for credit cards once you get your credit score high enough. Applying for several cards in a small period can be a bad strategy, as every hard inquiry is going to pull your score down by a few points. Also, keeping way too many cards at your disposal can complicate things very much. Therefore, it is advised that you must give yourself a six-month break once you apply for another credit card so that your CIBIL score gets enough time to recover.
Keeping your credit score in a healthy zone is an art that might be hard to champion, but once mastered, it provides you with many advantages and simplifies your financial planning in the longer run.
It can provide you with advantages like a discount on loan processing charges, loans with longer tenure, pre-approved loans, cheaper interest rates, higher credit card limits, and negotiation power.
Even the small things can have a really big impact as far as credit card score is concerned.