Creditworthiness is determined by the CIBIL score, a numerical representation of different factors used by lenders to determine your creditworthiness. Frequently checking your CIBIL score or credit report does not negatively affect your score. This is because the inquiry is recorded as a “soft inquiry,” which does not affect your score.
Financial institutions and lenders also do “hard inquiries” when you apply for a loan or credit card, affecting your score. It is recommended that you do checking CIBIL score every 3-6 months through a soft inquiry, to stay aware of your credit status and avoid multiple hard inquiries in a short period, which may lower your chances of getting a loan approved.
Factors that can decrease CIBIL score
Missed or Late payments
CIBIL scores are heavily influenced by the repayment history of the loans you have taken out. If you make late payments or miss payments, it will have a significant negative impact on your credit report. When you have not made your repayment for 30 days, you could lose as many as 100 points from your credit score due to your delinquency.
High credit utilization ratio
It is also important to keep in mind that your credit utilization ratio impacts your CIBIL score. There is a relationship between the amount of credit being used and the amount of credit available to you. There is a possibility that lenders might be suspicious of your ability to repay your debt if you have a high credit exposure.
There is a negative impact on your credit report if you have unpaid or outstanding debt. You should try your best to keep the number of your unpaid dues to NIL, even if it is not a large amount. An error in a credit report is not uncommon. Many people are unaware that mistakes can be made in their credit reports.