Dailybhaskar.com | By Deepak Yohannan | 5th Nov 2013

India was far behind in the race as far as credit rating and its practical applications were concerned. However, it is fast catching up. CIBIL (Credit Information Bureau of India Ltd.), the first credit bureau in India has spread its wings wide with the growing dependence of the financial industry on its ratings.

In olden days, credit managers at banks or other non-banking financial institutions manually checked references for credit ratings. Over time, companies were founded to gather credit information each time someone applied for credit. But this was largely dependent on personal judgement of the credit officer. However, with a high rise of demand with credit and loan, the credit worthiness of an individual has become high-in-demand information. The credit rating agencies provide credit scores, which is beneficial to both credit information seekers and borrowers. It provides its members with information on both consumer and commercial borrowers, thus enabling them make sound credit decisions across both individuals and borrowers.

As per the CIBIL’s official website the credit history, other than one’s income, is the single most important tool used by loan providers to evaluate an application for any loan or credit card application. In fact, it is very easy to maintain a good credit history if you follow the basic rules:

1. Pay your EMI’s on time and do not bounce EMI cheques, especially for all loans and standing instructions in banks.

2. The credit payment of other loans, especially Home Loan: Ensure you pay the EMI’s on times and never bounce cheques which result in lowering of credit ratings.

3. Pay your credit card payments on time by being a balance payer. It means, you should not revolve the payments on your credit card for too long and keep your credit balances as low as possible.

4. Never opt for credit card settlement; it spoils the credit ratings very badly.

5. Greater the number of unused credit cards you have, the more financially sound you are considered. Hence, you should think twice before closing a credit card account.

6. Review your credit history regularly and work on improving the score, if needed.

Thus, with the rise of the credit ratings and its applications in the asset side of the financial industry, it is very important for one to maintain a sound credit record so that there is no hassle while applying for a loan, especially if the amount is more than a few lakhs. The way the industry is progressing, with the uniformity of information in the form of Aadhar Card, credit scores being used for loans, a time may come when a default in mobile bill may cause a rejection of car loan or home loan. Non-payment of telephone, internet and other utility item bills will also rule the possibilities of getting a new credit card or even another mobile number. Thus, it is very important for each one to realise the importance of credit scores and work towards maintaining a healthy score so as to face minimal hassles later.

(The author is the CEO of MyInsuranceClub.com, an online insurance price & features comparison portal)

Source : http://goo.gl/M9EZvA