5 Factors Unknowingly Impacting CIBIL Score with No Credit/Loan
Credit application is like a marksheet. In order for any college to grant you the admission, they will check your marksheet and based on the marks you will be offered a seat in the college. i.e. whether student is worth giving admission or not is dependent on his/her report card. Similar is the case when you apply for credit card or loan. Banks want something to prove that an applicant is credit hungry or not. They cannot simply give credit to anyone. And banks do this by getting credit report from CIBIL. And the report is called as CIBIL report or Credit Information Report. The report mainly consists of two important information:
- Credit usage report such as number of ongoing credit/loans, repayment history, default payment and many others.
- Personal details such as PAN number, residential address, etc.
- Multiple applications: Not many of us are aware that every inquiry for loan or credit card gets reflected in the credit report. And within a short span of time, if multiple applications are made at one or multiple financial institutions, then for lenders this means applicant relies heavily on credit.
- Becoming guarantor: However there is one factor which can impact your credit score without you being taking the credit. That is Guarantor. Although your motive when at the time of becoming guarantor was to financially assist the applicant. But he/she can turn up defaulter in the future. In such cases, banks have legal rights to recover the money from guarantor. In addition to this, your CIBIL score also gets impacted.
- Banks do not update CIBIL: Make sure every bill is paid on time and fully and the same is reported to CIBIL. Although the reporting part is not in your control as it is bank’s responsibility. But it’s your duty to periodically cross check your financial transaction details (once in a year or before applying for loan or credit card) with CIBIL. As per rule, banks must update their CIBIL database within 45 days. If the same is not updated then your score will be affected.
- NOC & NDC on account closure: When you wish to close your card account then it is your duty to ask lender to provide no objection certificate and no dues certificate. NDC is especially very important and that too on bank’s official letter head bearing signature and designation of the authority. This legal document will act as a proof of no outstanding amount remaining. Moreover when you apply for loan or credit card at some other bank then you may be asked to furnish NOC or NDC or both. Also make sure, the status of account closure is reflected in CIBIL’s record, otherwise it will negatively impact your CIBIL score.
- Not using credit card: Once you get a card, you should use it diligently. But being an inactive card user will impact your credit score when the card has debt. What happens is that the card company closes your account when it is unused for a long time.
Hi, I am Nikesh Mehta owner and writer of this site.
I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business.