Overspending and impacts on CIBIL

Posted by Trishya Sharma on November 22nd, 2019

Festivals involve a different spending pattern with high expenses on items like cell phones, furniture along with other items which we generally buy during Diwali – as simple as apparels, sweets and gifts for friends and families. Considering these are expenses that are uncommon, it is logical to keep an eye on the credit card and other obligations to prevent being caught unaware concerning the quantity and dates of payments. Fantastic credit and CIBIL scores are what make you desirable loan candidate that is good because banks and loan companies look at those scores when deciding whether to loan you money and at what interest rate.

What Factors Affect Your Credit Bureau Scores?

Here are 3 factors that can affect your credit score:

1. Late or No Payments for Credit Cards after Diwali Spending:

The credit reports reveal number of days of pending and outstanding EMIs along with the dates.  Leaving dues on loan or even credit card shows up on your credit score and impacts defaulting on obligations are going to take a hit. Figure out credit card outstanding dues and plan sufficient finances to pay your dues off and see. It'll become a habit once you get in the practice of bill payments that are timely and it'll take just 6-9 months for your credit score and credit history to begin improving.

2. Credit Utilization Ratio:

The credit utilization ratio is the ratio between the credit limit you have used and that remaining in your credit card. A credit score ratio below 30 percent is considered a good financial health.  Your credit rating will be lowered by credit use ratio. Always be vigilant of this ratio and take in account of credit utilization versus actual need. If you create many purchases using credit cards or get new credit cards when they're available, this can result in that lots of queries by CIBIL.  Your credit rating may negatively impact, which means you want to be selective once you approving an EMI buy are obtaining a new card.

3. Increasing your credit card limit during Diwali

Many credit card holders increase their credit card limit as and when offered by the financial institutions, particularly before festive season or such times of the year. But this is not financial prudent way of getting ready for the festive season. Your credit history would be harmed by increasing your credit limitation, if you have increased your credit and not paid back in time.

What one can do?

Personal Loans meant for credit card debt consolidation helps in maintaining financial discipline. Credit Card Takeover Loans is particularly intended to help those who have high credit card debts and are particularly significant and beneficial post festivals such as Diwali.  The benefit of taking this loan is the rates of interest are lower compared to that of a credit card rates of interest.  Credit card interest rate is charged anywhere between 3-5% per month while a personal loan comes at almost half the interest (1.2-1.8%) along with building financial discipline which positively impact the credit score.