A CIBIL score is essentially a financial performance report that banks and financial institutions looking to lend you money or give you credit cards refer to. A lot of people are surprised when they find out that their score has changed drastically and they have no idea why. A good CIBIL score is the key to getting a lower interest rate, the loan that you want will be sanctioned very quickly, and you will also get higher credit limits. However, if your score is low, the result will most probably be a rejected application and you will be required to pay a very high-interest rate. Hence it is very important for your financial future to keep your score good.

Finance and Taxation expert, CA Gaurav Kumar takes you through the frequently asked reasons behind CIBIL score fluctuations and shares simple steps to keep it strong.

Why Your CIBIL Score Goes Up and Down

Your CIBIL score is not always constant. It fluctuates based on the way you take care of your credits and loans. Below are the main factors:

1. Late Payments

Not meeting the date of payment of an EMI or credit card due is one of the quickest ways to lower your CIBIL score significantly. Moreover, even a single late payment can negatively affect your credit history and show to the lenders that you are risky.

2. High Credit Card Usage

In case you are always using more than 30–40 % of your total credit card limit, then the credit utilization ratio is affected and so the score goes down.

3. Multiple Loan Applications

Attempting to get a loan as well as multiple credit cards within a short span of time will make you appear as if you are in need of a lot of credits. As a consequence, each application generates a “hard inquiry” that has the effect of lowering your score.

4. Old Loan Closures

Ironically, terminating a very old loan account may lower your score just a little bit by virtue of the shortening of the credit history length.

5. Errors in Your Report

There are times when banks or other financial institutions err in the reporting of the loan details. These kinds of mistakes, if they are not fixed, can drive down your score unfairly.

How to Improve and Maintain a Healthy CIBIL Score

Simple steps to show a continuous increase in CIBIL score are shared by CA Gaurav Kumar:

• Make timely payments of your bills: Reminders or auto-pay can help you never missing the due date of a bill.
• Be credit wise: Try not to use more than 30% of your credit limit.
• Don’t submit too many applications: Only apply if you really need to.
• Regularly check your credit report: Finding errors and raising complaints to get them corrected.
• Keep a healthy credit combination: The use of both secured (home loan) and unsecured (credit card) loans gives you a strong credit profile.

Why a Good Score Matters

If you maintain a good CIBIL score you can save a huge amount of money in the form of interest which you have to pay over a period of time. It also gives you access to offers that are already approved and thereby makes getting money under emergency situations easy and quick. But if you have a low score then it is quite sure that you will face trouble while borrowing money as it will become costly and stressful.

Gaurav Kumar, a chartered accountant, points out that scoring is not a one-day miracle, but a slow and steady path. The right habits will not only help you build your financial reputation but also keep you always prepared to grab any opportunity.

Conclusion

The CIBIL score of a person reflects their financial discipline. It is a step to taking charge of your credit health when you know the factors that result in your credit score to go up or down. One can keep their credit score strong and stable by paying the dues on time, responsibly using credit and regularly monitoring their credit report.