Money-Wise: Your credit score matters. Here's how to maintain a good one after CIBIL updates

The CIBIL score becomes an important factor in getting a house loan, a car loan or any other kind of loan approved at a good interest rate. So it is always advisable to maintain a good CIBIL score to prevent avoidable financial burdensahead.

But now with the new updates introduced in the CIBIL score by the Reserve Bank of India (RBI), is it still going to be easy to maintain them or will one be required to take some extra steps? Let's first understand what is CIBIL score and what are new changes introduced.

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What is a CIBIL score?

CIBIL stands forCredit Information Bureau India Limited. CIBIL score is a 3-digit number which summarises a person's credit rating, history, and report. The CIBIL score ranges from 300 to 900. The closer the score is to 900, the better the credit rating of the borrower.

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A good CIBIL score makes it easy for the loan to get approved and also helps the person bargain for a lower interest rate on the loan. Generally, a score of 700 is seen as a good CIBIL score.

What changes has RBI introduced in CIBIL score?

TheRBIhas asked lenders - like banks and NBFCs - to submit credit information reports to credit information companies (CICs) like CIBIL, every two weeks. This means that the CIBIL score will be updated fortnightly and will give a more accurate and timely representation of the credit standing of the borrower.

Explaining the impact of this change to WION, Bhushan Padkil, Senior Vice President and Head of Consumer Interactive (Direct To Consumer) India at TransUnion CIBIL, said, "With more frequent data reporting by banks and credit institutions, CICs will be able to update credit records faster and this will translate into more updated data being available for making informed lending decisions by credit grantors. This will also help in resolving consumer disputes faster based on updated data in the credit records."

How to improve your CIBIL score?

So now that the CIBIL score will be updated fortnightly, our expert Bhushan Padkil, Senior Vice President of TransUnion CIBIL, explains how you can improve the CIBIL score.

• Monitor and fact-check your CIBIL Report regularly: The best way to keep in touch with your credit activity and maintain your credit health is to monitor your CIBIL score and report regularly.
• Pay your EMIs on time, every time: Even one missed payment can impact your CIBIL score. One way to make sure your payments are on time is to set up automatic payments or set up electronic reminders.
• Spend within your credit limit: Ensure that you keep your credit utilisation within your credit limit. For example, if your credit card has a limit of Rs. 1 lakh per month, ensure that you do not exceed that limit.
• Only apply for credit that you need: If you apply for a lot of credit over a short period of time, it impacts your CIBIL score. Multiple frequent enquiries may provide an impression to lenders that you are credit-hungry.

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But what if one's CIBIL score hasdipped for some reason? The CIBIL score can be rebuilt with a healthy credit profile over time. Bhushan Padkil shares some good credit practices one can adopt to regain CIBIL scores.

• Pay off all outstanding amounts: In case of multiple loans and cards, consolidate all loans and take a single loan to pay it all off.
• Pay timely EMIs in future: Maintain disciplined payments and EMIs to improve your CIBIL score over time.
• Apply for credit judiciously: Keep track of your credit utilisation and apply for more credit only if you really require it.