How Important it is to Maintain your Credit Rating

  •   Sat, Aug 16 2025
  •   By Adarsh Shetty

August 16, 2025

Recently I read a news report where in an engagement was called off in Uttar Pradesh because the groom’s CIBIL report
had many settled/unpaid loans. In an another article, State Bank of India had dismissed an empIoyee, recently recruited by SBI Chennai Circle because his Credit rating was pathetic. The employee approached the courts against the bank and ultimately the courts ruled in favour of the bank saying that a person who is not able to handle his personal finances is not a right person to manage public funds.

Above reports do show how mismanaging borrowings affect social reputation. On the other hand, maintaining healthy Credit repayment habits becomes all the more important in modern day banking for individuals and firms. In India, Banks primarily refer to ratings of four major Credit rating agencies. One of them is Transunion CIBIL, which is popularly known as CIBIL.

Here are a few steps which needs to be followed for maintaining healthy Credit rating:

# Take small loans: Even if you are not in need of borrowed amount, take a small loan to activate your Credit portfolio and repay it regularly as per EMI schedule. Without a loan being taken from a RBI recognised Institution, the credit agencies cannot rate your credit behavior. If you have nil credit rating or -1 rating, then you shall have to pay a higher rate of Interest in Banks when you take a loan for the first time.Don’t be ever under the impression that if you have not taken a loan you shall get loans easily and at lower Interest rates. Its actually the other way round.

#Use Credit Cards and pay regularly: It is a good habit if you are using credit cards and paying your monthly dues regularly. It increases your credit ratings and it shall be easy for banks to analyse your credit behavior. Never default on payment and stick to payment schedules.

# Make small gold loans: If you haven’t taken a Ioan till date and do not even have a credit card and fear of getting a higher Interest Ioan during your requirements in the immediate future, because of your nil Ioan portfoIio, then don’t worry. What best you can do is, take a small gold Ioan in a Nationalized Bank or a NBFC and close it within two or three months just before you apply with the bank for your housing Ioan or business loan or whatever kind of loans. This step increases your credit ratings immediately and shall help you in securing loans at a lower rate of Interest.

#Never opt for Loan settlements: If you have taken a loan from a bank/NBFC/ Cooperative Bank and you are not able to repay in time and bank is pressurizing you for repayment, never opt for a settlement offer that banks gives you. A settlement is something wherein you are told by the bank to repay a substantially lower amount than the amount which is actually overdue to the bank from your side. Though you may feel that this deal is profitable to you at that moment, in the long run it shall definitely hamper your credit rating and no banks shall give you loans in future, atIeast for the next 20-25 years. So never go for settIement, however difficult it is for you please “close” the loan and never “settle”.

#Never ever leave the loan unpaid: If you have taken a loan from a bank or a credit through a credit card years back and the same is still remaining unpaid, then never think that you have saved that money by not paying it and the banker has forgotten it. The banker would have done his efforts to contact you, but just because you had left the country or have shifted base to a new city and are incommunicado, the banker reports the same to Credit Rating Agency as “written off”. A written off loan will always haunt you in future, whenever you approach a bank for credit/Ioan, the banker shall not be interested to lend you because your past credit behavior is not honest and healthy. Clear such loans as and when you can and “close” it as early as possible.

#Do not check your CIBIL frequently: Please do not check your CIBIL every now and then. It is not a healthy sign. It only shows that you are moving from one bank to other and you are not getting loans that you are looking for from your banker. Further it shows that you are credit hungry and banks are not interested to lend you. The more number of Ioan enquires, lesser the respect you earn from your bankers.

 

 

 
By Adarsh Shetty
Adarsh Shetty is a Financial and Insurance Consultant, Aadee Finsool, No 304, 3'rd Floor, City Plaza, Near PVS Circle, Mangaluru-575004. Cell:9663383567
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