Credit score is a numerical representation of a borrower’s creditworthiness used by financial institutions to assume the risk associated with lending. Credit score is important when an individual applies for loans or credit cards. Usually, credit score above 750 has a positive impression on the lender.
The four credit bureaus responsible for calculating credit score are – Equifax, Experian, High Mark and CIBIL. The credit score provided by the credit information bureau limited (CIBIL) is widely accepted by all NBFCs and financial institutions. The credit score depends on the Credit Information Report (CIR) made by CIBIL. CIBIL score can be checked online on CIBIL’s official website by providing few essential details like name, address, phone number.
There are several factors which affects a borrower’s credit score. Timely credit card payment is one of the most vital factors. Borrower’s repayment history constitutes 35% of the credit report. A credit score is checked to ascertain whether you will make your bill payment on time or not.
Hence making late payments of credit card bills or any other kind of loans or missing payments will negatively impact your credit score. On the other hand, repayment of full amount by the due date will have a positive impact on your credit score.
How to improve credit score?
- Avoid multiple loan application
Avoid applying for multiple loans within a short period since it will make you a high risk borrower.
- Introduce credit mix
A combination of secured and unsecured loans creates a positive impact on credit score. It is advisable to avail unsecured and revolving lines of credits, like a Bajaj Finserv RBL Bank SuperCard, if a borrower only has availed secured credit beforehand.
- Minimise the credit utilisation ratio
Just as loan repayment in full has a positive impact on credit score, not utilising more than 30% of your credit limit also has a positive effect on your credit score. It suggests to your lenders that you are not in too much debt and will be able to pay back your loans in time.
- Repay the full amount due
The credit card statement usually reflects two components, total amount due, which is the full amount that you have borrowed from the lending company and owe them and minimum amount due which is the minimum payable sum to avoid paying additional charges.
Paying the total amount will increase your credit score as it shows you have high repayment capability.
Financial experts suggest availing credit cards that come with suitable grace period and affordable interest rate that helps you with the repayment process. Financial institutions like Bajaj Finserv offer such financial tools, along with pre-approved offers that streamline the process of availing finance while saving time.
Borrower can improve their CIBIL score with timely repayments of their credit card bill. Here are some pointers on how they can use their credit card to increase their CIBIL score.
Some NBFCs and financial institutions offer other benefits with their credit cards. For example, with Bajaj Finserv card, one can avail several unique and industry first benefits against their expenditure.
- With every purchase with the credit card, the borrower gets huge reward points. The reward points can be also be used to avail discounts on other purchases. There are several other things to do with credit card reward points that can help a borrower save money.
- Usually, an instant interest is charged when borrower withdraws cash from the ATM with a credit card. With the Bajaj Finserv RBL Bank SuperCard, borrowers can avail instant cash with 0% interest charged for a period of up to 50 days.
- Big purchases can be easily managed by converting them into EMIs with these credit cards.
- The borrower can also take out a personal loan against the unutilised credit limit.
- You can save up to Rs. 55,000 yearly with the help of Bajaj Finserv credit card.
Be it for availing a credit card or taking out other loans; a credit card can be used in a variety of ways. Nevertheless maintaining a good credit score is very important. When you make your credit card payment in time, it will have a positive impact on your credit score.