A credit score’s function has expanded beyond that of a simple indicator of creditworthiness. Lenders that use risk-based pricing and businesses who check credit reports before extending offers of employment are both indicators of the growing importance of credit scores.
Customers having a good SBI home loan CIBIL score need to make an effort to keep it that way so they may continue to qualify for cheap interest rates and a wider variety of credit card options. When working toward this goal, however, it’s important to avoid the following pitfalls that can have a bad effect on your credit:
A failure to timely pay overdue loan payments and credit card balances
Financial organisations are more likely to lend money to consumers who have shown a history of timely bill payments and EMI contributions. Similarly, it is commonly believed that your credit repayment history is given a lot of weight by credit bureaus when calculating your credit score.
Your SBI CIBIL score and credit rating will take a hit if you have a history of late payments, such as a missed credit card payment or a loan instalment payment. Moreover, such payback discrepancies are normally maintained on your credit report for a lengthy period of time, negatively affecting your future loan and credit card qualifying ability. This is reflected in a free monthly online credit check.
Make sure that you always pay your credit card balance in whole and on time, and that you never miss an EMI payment on a loan. Eventually, this would help you build or improve your credit score, increasing your future access to credit.
Maintaining a high debt-to-credit ratio
The credit utilisation ratio indicates how much of your available credit you are actually using each month. Credit bureaus will reduce your SBI home loan CIBIL score if your credit utilisation ratio is above 30-40%, since lenders often view this as an indication of credit hunger.
If you want to keep your credit utilisation ratio from reducing your SBI CIBIL score, keep it between 30% and 40%. If you routinely spend more than this amount, you should contact your credit card issuer about increasing your credit limit or getting a new credit card. Doing so will increase your overall credit limit and reduce your credit utilisation ratio.
Avoiding routine checks of your credit report.
Anytime you apply for a new line of credit, whether it’s a credit card or a mortgage, the lender will pull your credit report to make sure you’re reliable with your bills. Credit bureaus utilise this report, which is a summary of your loan and credit card repayment history, to determine your credit score.
Due to clerical errors on the part of the lender or credit agency, or in the case of transactions you are unfamiliar with, your credit report may contain false information. The necessity to promptly discover and rectify mistakes or fraudulent activity on credit reports emphasises the need of performing a free SBI home loan CIBIL score on a frequent basis.
You should take advantage of the fact that each of the four credit bureaus now operating in the country is required by law to provide you with one free credit report annually. Make sure that you are requesting credit reports from all four major bureaus so that you only use your annual right to a free report once every three months when you use the free online credit score check service.
Constantly contacting creditors for information on loans and credit cards
If you have a high credit history and reliability and are interested in a house loan, the lender will pull your credit report from a credit bureau. Credit report requests made by loan originators are considered “hard inquiries” and are reflected as such on the consumer’s credit file. You could possibly see a drop of a few points in your SBI CIBIL score as a result of them.
The monthly process of checking your credit score for free online may be accomplished through online financial portals, where you can also compare lenders and select the best one based on your financial needs and qualifications rather than having to submit individual inquiries to each one. Credit report information obtained through such portals is considered a “soft inquiry,” which has no bearing on a person’s SBI home loan CIBIL score when applying for a mortgage.
Negligence in maintaining records of guaranteed or cosigned loan accounts
Anyone who helps secure a loan by cosigning or acting as a guarantor assumes full responsibility for its timely repayment. Both the primary borrowers and the co-signer would suffer equally damaging credit score reductions in the event of a delay or default in the repayment of the connected loan.
Checking in on the status of any loans you’ve cosigned or guaranteed repayment on is a smart idea. Not keeping tabs on them can cause your credit score to drop, which could make it difficult or impossible to get a loan or credit card in the future if you need one.
Higher share of unsecured loans in total credit
The ratio of your secured debt to your total debt is one criteria among many that credit bureaus consider when calculating your SBI CIBIL score. A higher percentage of secured loans, such as a mortgage, auto loan, or loan secured by property, in a borrower’s credit mix is viewed favourably by credit bureaus because such borrowers are preferred by lenders. If you have recently prepaid any debts or obtained any new loans, secured or unsecured, the mix of these types of credit will be shown in your credit report.
Alternatively, you might try increasing the proportion of secured loans in your credit portfolio by taking out a loan against gold or equities, or refinancing your mortgage (for existing mortgage borrowers). Paying off unsecured debt like personal loans, loan against credit cards, and similar loans is a more faster approach to enhance your SBI home loan CIBIL score. This is because a higher percentage of your loan portfolio is comprised of secured loans, which in turn improves your credit score.