Applying for a loan? Five ways to play safe with your CIBIL score

Watch your credit inquiries: Having multiple credit inquiries in your report can be particularly damaging to your CIBIL score. Multiple inquiries typically happen when you send applications to too many lenders simultaneously with the motive of getting approved by at least one lender. Note that every time you apply for credit, a hard inquiry is registered in your credit report. Too many inquiries only signify credit-hungry behaviour, an attribute that lenders don’t quite like to entertain.

In order to ward off multiple inquiries from happening, make sure you only apply with just 1 lender when you’re on the lookout for credit. Carefully examining the lender’s loan terms and eligibility criteria will help you avoid rejection and apply with a lender that’s more accommodating of your request, as rejections can be detrimental to your credit health as well.

Avoid applying with DSAs or third-party agents: Third-party agents and DSAs who register themselves with multiple banks often send your application to several lenders at the same time. This automatically registers multiple inquiries, leading to consequent rejection by lenders. It is important to do your research and know who you’re sending your loan application to.

Strictly avoid non-payments or defaults: As a matter of fact, no attribute can negatively impact your CIBIL score as much as defaults can. Even one instance of default can bring down your score by a massive 50 points (it can be higher as well if defaults happen across credit accounts). After defaulting and the ensuing impact it has on your score, rebuilding can take a hell lot of time, oftentimes upwards of 2 years for your score to fall back to normal, acceptable levels.

Watch your Credit Utilisation Ratio and Debt-to-Income Ratio: Keep a close watch on how much credit you’re using up on your credit card, and your total monthly obligations as a percentage of your income. If you’ve maxed out your credit cards and your DTI is high, you’re bound to get rejected by lenders across the lending spectrum (including fintech lenders who entertain applicants with sub-prime credit scores but often reject applicants who have a high DTI).

Watch the number of credit accounts linked to your profile: This point is pretty straightforward – just make doubly sure you don’t have too many credit cards or loan accounts, as it often influences rejection, causing your score to drop significantly in super-quick time.

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