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 such 7 factors, due to which the CIBIL score can get spoiled.
First, know what is CIBIL.
It 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 based on your old loan, credit card bill, etc. If you keep repaying all your loans and card bills, then your CIBIL score gets better, whereas if you default, then your CIBIL score gets worse. Let us know such 7 reasons, why the CIBIL score gets spoiled.
1- Missing an EMI
If you already have a loan running and you miss an EMI, it directly affects your CIBIL. This reduces the CIBIL score. If you miss too many EMIs or default on the loan, 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 may cause it a loss.
2- Due to 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 loans, 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 a loan from the bank from which he gets a loan at a lower interest rate. Keep in mind, that 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 NBFC checks your credit score, it is called a hard inquiry. Whereas when you check CIBIL online yourself, it is called a soft inquiry. Hard inquiry causes your CIBIL score to decrease.
4- Making big or excessive purchases with a credit card
If you make a big purchase or a lot of purchases with a credit card, then 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 there is a hard inquiry in this too, due to which CIBIL decreases. However, this is temporary and CIBIL gets better again in some time.
6- Closing a credit card
If you close a credit card, then this 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 hurts the CIBIL score and it decreases.
7- Repaying the loan before time
If you close a loan before time, then this also affects your CIBIL. Two types of loans are given by the bank, secured and unsecured. If you take a secured loan and close it before time, then your CIBIL may decrease a little. However, this is temporary and it gets better again in some time.
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