Tuesday, 17 February 2015

FAQs about CIBIL Score

Many people are new to the concept of a credit score and the credit rating bureaus like CIBIL, Equifax, and Experian. They go to take a loan and get stuck when at the CIBIL score part and have questions. We’ll answer some Frequently Asked Questions about CIBIL score in this article:

1) How can a person with no credit build a credit score?
It is hard for a person who is just out after completing his studies and has no credit score to build a good credit score. You don’t get a credit card and loan without a good credit history.So where does he start? The best option would be to get a secured card. In a secured credit card, credit score is not needed and it is given on the basis of a cash deposit as security collateral. It is a refundable deposit which becomes your credit limit. You have to make monthly payments but if you default, the bank keeps your deposit.After some time using the secured card, you can move to a credit card and thus build your credit score.
 CIBIL score

2) Checking your Free Credit Report lowers your credit score?
This question is asked by many new credit users. No, checking your credit report at regular intervals won’t lower your credit score. It is a soft enquiry and doesn't affect the credit score of an individual. In fact checking your credit report helps you spot any errors and inaccuracies in the report and correct them.

3) Should unused credit cards be closed?
People think closing old accounts increases your credit score. But this can work more against your credit score than help in raising it. If your credit card account has a big credit limit and has been with you for a long time, avoid closing it. Because it affects two things- the average age of your accounts and your credit utilization ratio, both of which are factors which affect your CIBIL score. Closing a credit card account lowers your credit limit and also reduces the average of your accounts which may negatively affect your credit score.

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