CIBIL Score News: CIBIL score is an important parameter in taking a loan. If the score is bad, then financial institutions can refuse to give a loan or charge more interest. In such a situation, our CIBIL score needs to be good. Often you must have seen that nowadays everyone rushes to take a loan due to a shortage of money, but only if the CIBIL score is good, we will get a loan, otherwise, our loan file can also be rejected. Usually, people believe that the CIBIL score gets spoiled if the card is not paid on time, but let us tell you that there are many other reasons why the CIBIL score gets spoiled. Let's understand in detail -

CIBIL Score gets spoiled due to these reasons -

1) Application for a new Credit Card

When you apply for a new credit card (how we apply for a credit card), the card issuer checks your credit report. Because they want to see how much risk you can take before giving a loan. This credit check is called a hard inquiry, or “hard pull,” which temporarily lowers your credit score by a few points.

To reduce the number of unnecessary “hard pulls” on your credit report, check if you are eligible for a new card using the card issuer’s pre-approval or pre-qualification offer. Always apply for a new credit card at 3-month intervals and wait longer before applying for a new one if your credit score is low.

2) Making big purchases with a credit card

Credit cards are convenient for making big purchases because you don’t have to pay right away. That’s why the number of people using them is constantly increasing. However, having a high balance on your card will tell the credit bureaus about high credit utilization (CUR). Your debt-to-credit ratio is the ratio that tells you how much credit you use compared to the amount you have available. Experts suggest that credit utilization should be less than 30 percent, while some people consider it better to be below 10 percent.

Before you make a big purchase with your credit card, make sure that you pay it off in full before the billing cycle ends. Because maintaining a high balance on the card is not only bad for your credit utilization score, but you will also have to pay a lot of interest on this entire amount.

3) Not paying credit card on time

Payment history on a credit card is the biggest and most important factor that determines your credit score. Therefore, not paying the card on time has a bad effect on your credit score. Needless to say, lenders and card issuing companies pay special attention to whether you have paid your previous credit card on time.

According to statistics, a 30-day delay in credit card payment can drop the credit score by 17 to 37 points and a very good credit score can go down by 63 to 83 points. On the other hand, a 90-day delay in payment causes the credit score to drop by 27 to 47 points while the excellent score can drop by 113 to 133 points. In such a situation, the bigger the drop in your credit score, the worse the effect will be.

4) Paying loan through card

While paying off a loan with a credit card may increase your credit score, it can have the opposite effect on a mortgage loan or student loan. Paying off something like a car loan can actually drop your credit score because it means having one less credit account in your name. However, no one stops you from paying off a loan with a card. But there is no point in paying unnecessary interest to save a few credit score points.

5) Closing a Credit Card

Closing your old credit card account damages your credit score because it reduces the overall credit limit available to you. Your credit history accounts for 15% of your FICO score, which is why experts recommend building credit at a young age.

Before closing your credit card, talk to your card issuer and see if you can downgrade it to a no-annual-fee card or upgrade to an unsecured credit card in case of a secured card. This can help you preserve your credit line.

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