If you are in the market for a bank loan, mind your credit card spending even if you have a high limit. That is not all. You need to stop being "credit hungry" and pay your household bills on time if you want a good credit rating as an individual.
While increased spending alone may not necessarily bring down your score, an increase in the current balance on the card over time is an indication of an increased repayment burden and may negatively impact your rating, which reflects your repayment capacity.
"It is always prudent to not use too much credit," says Credit Information Bureau (India) Ltd (CIBIL), which tracks your credit history and assesses your credit worthiness."All banks are very particular about the credit records of customers and their spending pattern and they assess CIBIL's scores before sanctioning loans," said Arun Thukral, managing director, CIBIL. While any lender can access the score of a customer, the assessee too can check this data and can ask for a review if she is not satisfied.
The 'score' - a three-digit number between 300 and 900, helps banks estimate the credit worthiness and repayment capacity of an individual.
The higher the score, the stronger is the credit worthiness. As per CIBIL, over 80% of the consumers today have a good credit history.
The score is given based on income of an individual, her credit pattern and financial behaviour in the last 36 months.
"The CIBIL scores are very effective... we also do internal assessment taking into account a person's future trend on employment," said TM Bhasin, CMD, Indian Bank.
The Reserve Bank of India has also asked banks to be cautious as a higher-than-expected hike in interest rates could have an adverse impact on the asset quality of banks.