One can consider CIBIL score as one of the most important factors to avail any form of credit or debt or loans. It is important to research, study and compare the factors that influence the CIBIL score in any way so as to ensure a healthy credit life.
Experts say that having multiple credit accounts does not affect your CIBIL score. The Credit score uses a complicated mathematical formula that considers a variety of factors such as debt payback history, timely debt repayments, frequency of loan and credit card applications and denials, number of existing loans and credit cards, and so on. The CIBIL score does not get affect by several credit accounts; however, a lack of debt repayment discipline is. When you have many credit accounts, maintaining a good CIBIL score can be difficult. But don’t be concerned! It’s also not that difficult.
What factors affect your CIBIL score?
The CIBIL score calculation uses a complex mathematical formula that takes into account a number of factors including credit history, repayment history, utilization, number of inquiries made, and credit mix. When a person has numerous credit cards, it can be difficult to keep track of all of these elements, which can have a detrimental impact on a person’s credit score.
Payback History
It’s worth noting that payback history is one of the most influential criteria in determining a CIBIL score. The repayment history of the borrowers refers to whether or not they have paid their EMIs or credit card bills in whole and on schedule. When a borrower misses a payment, it is reflected on their credit report. As a result, it has an influence on their credit score if their repayment history is not spotless.
Credit utilization
Credit utilization is another important factor in determining CIBIL. For example, if borrowers have a credit limit of Rs 100, how much of that Rs 100 are they using on a monthly basis? It’s fine to have multiple credit cards as long as the borrower keeps a reasonable utilization ratio.
Number of inquiries made
Number of inquiries made is another factor in determining CIBIL score. The more inquiries you make, the more credit hungry you are. As a result, the inquiry is something to be aware of. While having two to three credit cards isn’t going to hurt your score, having too many cards and triggering too many inquiries can be detrimental to your credit score.
Check your CIBIL score regularly
Check your credit score using your CIBIL report before applying for a credit card or a loan. Examine your transaction list carefully to ensure that there are no errors, duplicates, omissions, or fraudulent transactions. With no fault of your own, these mistakes lower your CIBIL score, increasing your chances of being denied a loan or credit card application. If you discover inaccurate information in your CIBIL report, you must file a dispute with CIBIL. Get it corrected in order to enhance your CIBIL score and thereby your loan or credit card eligibility.
The Bottom Line
It’s a fatal loop from a technical standpoint. Having too many credit accounts may lead to a need to obtain new credit more frequently. This is so as to make payments on current credit accounts. Multiple credit inquiries result, giving lenders the impression that you’re a high-risk borrower. A high number of queries with the bureau lowers your score, resulting in rejections, which have an even greater impact. As a result, avoid having several accounts. Always do a CIBIL score on a regular basis.
Your credit score will not be affected if you can properly manage your credit accounts. This can be done by maintaining a healthy credit utilization ratio on your credit card and a good monthly debt-to-income ratio. Also, you should be consistent with repayments and avoiding late payments and defaults.
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