Credit Wise

Your credit history, other than your income, is the single most important tool used by a lender to evaluate your application for any loan or credit card. Naturally, it's important that you understand your CIBIL Credit Information Report (CIR) and what it takes to maintain a credit history, so that is viewed favourably by lenders.

Following are few steps to ensure a healthy credit history:

Always pay your bills on time. Late payments are viewed negatively by lenders and may affect the chances of your loan getting approved.

Keep your balances low. While the balances on your loans will only reduce over time as payments are made, you must be diligent about making timely payments on your credit cards. Also, you should control your utilization of credit cards. For example, if you have used Rs. 90,000 out of a credit limit of Rs. 1,00,000, this may be viewed negatively by a lender. It's always prudent to not use too much credit.

Maintain a healthy mix of credit. Your credit history should contain a mix of a home loan, auto loan and a couple of credit cards. A high number of just credit cards may affect the chances of a loan approval. Why is it so, you may wonder. Although a credit card offers easy access to finance, it's also by far the most expensive form of credit. More the number of credit cards with high utilization, larger are the payments resulting from its high rate of interest.

Apply for new credit in moderation. If you have made many applications for loans, or have recently been sanctioned new credit facilities, a lender is likely to view your application with caution. This ‘Credit Hungry' behaviour indicates your debt burden is likely to, or has increased and you are less capable of honouring any additional debt.

Think twice before closing credit card accounts. While using credit cards may negatively impact your credit history, unused credit cards actually imply that you are financially secure. This makes lenders view your application more favourably.

Monitor your co-signed and joint accounts monthly. In co-signed or jointly held accounts, you are held equally liable for missed payments. This is extremely important because your joint holder's negligence could affect your ability to access credit when you need it.

Review your credit history frequently throughout the year. Unpleasant surprises in the form of rejected loan applications can be avoided by ensuring that your CIBIL CIR accurately reflects your current financial status. So reviewing your credit history 3-4 times each year is imperative.

Though these general rules are important to keep in mind, each lender has its own policies to sanction a loan to an applicant.

Steps to be undertaken when you spot a mistake on your CIBIL Credit Information Report (CIR):

Typically, you check your CIR when your loan gets rejected and the lender tells you it's because of some information on your CIBIL CIR. But there is no need to panic! Mistakes on a CIR can be easily corrected with the help of the credit bureau. All you need to do is:

Purchase your own CIR from CIBIL Identify the erroneous information

Provide name, address, date of birth, an Enquiry Control Number (ECN) and the nature of the error on CIBIL website. This is known as a ‘Dispute Request' in credit bureau parlance.

The ECN is a unique 9-digit number found on the top right hand side of your CIBIL CIR and is generated every time a CIR is generated. It is very important to provide this number to the bureau, as it helps identify the CIR on which you would like to ‘dispute' information.

Harshala Chandorkar, Senior Vice President – Consumer Relations, CIBIL

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