Aditya and Kuber were having some snacks after a good 30-minute morning walk when Aditya’s phone rang. The call was from ABC Bank where he had applied for a housing loan. Manager conveyed to him that his CIBIL check gave adverse results and was showing regular amounts overdue in credit cards. As a result, they could advance loan to him only at a higher rate of interest.
“All of a sudden, where has this CIBIL check cropped up?” Aditya was visibly upset after the call.
“For the new customers approaching banks for loans, their credit history is the most important parameter for the bank to take a decision on giving the loan. Banks get this credit history through your CIBIL check. It gets all the more important to have a better credit score since it reflects the borrowing and repayment tendencies of the person by providing information about various loans and credit cards availed. This report shows the loan/ card accounts held with different banks, its repayment history, overdue status and thus, acts as a perfect tool for a bank to judge the defaulting tendency of the borrower.“Kuber started explaining as if he was just looking for an opportunity to guide Aditya.
“The CIBIL check score ranges from 300 to 900 with the 300 score being rated for the riskiest borrower and 900 going for the borrower with best credit history.The credit card bills and loan EMIs should always be paid timely and without delay timely. Since repayment history is one of the major factors affecting your score, timely repayments will translate to a high credit score.” Kuber continued.
“But, I have been paying all my dues on time. However, on one of my credit cards, I have been paying minimum amount dues, since I made some high purchases during Diwali. I think that must be going against me.” Aditya was in a confused state of mind.
“Bingo! Credit card companies generally provide an option to pay just minimum dues but that only helps the customer to avoid the levy of finance charges/ interest and late payment charges. It still shows the amount due in the credit history and thus affects the credit score.” Kuber made him reach the conclusion.