Straigten up! You have a bad credit behavior if you are doing any of these!

Getting a loan is a task. And nothing could be worse if the loan is rejected because of a poor credit score. BI India talks to Harshala Chandorkar, senior vice president of Consumer Services & Communication at CIBIL and lists down common mistakes that can hamper your financial future seriously.

“This 3 digit number, is your CIBIL TransUnion Score which ranges from 300 to 900. This score is calculated based on your credit history as reflected in your CIBIL Report. Today an individual’s CIBIL TransUnion Score is one of the important factors that banks and credit institutions review before granting a loan or a credit card. An individual's CIBIL TransUnion Score provides a Credit Institution with an indication on the likelihood of the individual paying his loan or credit card dues on time. Higher the score more favorably the loan application will be viewed by a Credit Institution. Most banks and credit institutions today lend to individuals who have a credit score of 750 and above,” said Chandorkar.

Missing out on paying EMIs on loans

Have you missed out on paying your monthly EMIs on any of your loan. This is quite a common trend often observed amongst young consumers, who often take loans and delay the EMI payment.

“Default on the monthly payment will occur if sufficient fund is unavailable in your linked account. Defaulting on loan EMIs is detrimental to your CIBIL TransUnion Score. So ensure you pay your loan EMIs month on month and have adequate funds in your bank account for the loan EMI debit,” said Chandorkar.

Defaulting credit card bills

“Delay or default on credit card bill payment: Forgetting to pay your credit card bill on the due date or not paying your credit card bill at all can hamper your credit score drastically. Ensure you set up payment alerts on your credit card bill and make the payments before or by the due date,” she explained.

Settlement on a loan or credit card
You may think it is a wise idea to settle your outstanding credit card bill or loan but believe it or not, it is often considered to be bad credit behavior by the banks.
“If the customer has partly paid the dues and settled a loan or a credit card then the status will reflect as "Settled" in the credit report. It is important to understand that though there will be no impact of the “settlement” flag on the customers CIBIL TransUnion Score, his credit history will show a “Settled” status in his CIBIL Report and there will be Days-Past-Due reflecting on the report since the payment on the loan has not been timely. Each bank has its own policy of viewing at a “Settled” status and will decide on the consumers future loan applications accordingly. Therefore it’s best to not ever get into a loan settlement,” pointed out Chandorkar.

Exceeding or reaching the limit of your credit card

“Spending more than the assigned limit on your credit card or spending close to the limit on the credit card may affect your credit score to some extent. Therefore ensure that you spend well within the limit on your credit card,” she noted.