A consumer's CIBIL Transunion Score and credit report has today become the most important indicator of his or her financial discipline and credit eligibility.  Therefore a consumer with a good CIBIL TransUnion credit score is most desired by lenders and can use this powerful reputational collateral to his or her advantage. Lenders generally look for a credit score which is higher than 700 for granting loans and credit cards.

Therefore it is important to maintain financial discipline and make timely payments on your loan and credit cards in order to improve your credit score. Here are some common mistakes that can hamper your credit score:

> Late payments or defaults in the recent past: The individual's payment history has a significant impact on the score. Hence, if the individual has missed payments on any of his/her existing loans, over the last couple of years, the Score is likely to be negatively affected because it indicates that the individual is having trouble servicing his/her existing obligations.

> High Utilization of Credit Limits: While the balances on the individual's loans will only reduce over time as payments are made, he/she must be diligent about making timely payments on credit cards. While increased spending on the individual's credit cards may not necessarily negatively affect his/her Score, an increase in the current balance on the card over time is an indication of an increased repayment burden and may negatively impact the Score.

> Higher percentage of Credit Cards or Personal Loans (commonly known as Unsecured Loans): A higher concentration of home loans or auto loans (commonly known as Secured Loans) is likely to be more favorable for the Score than a large number of unsecured loans. Although unsecured loans offer easy access to finance, it's also by far the most expensive forms of credit. More the number of unsecured loans with high utilization, larger are the payments resulting from its high rate of interest.

> Being 'Credit Hungry': If the individual has made many applications for loans, or have recently been sanctioned new credit facilities, a Credit Institution is likely to view the individual's application with caution. This 'Credit Hungry' behaviour indicates that debt burden is likely to, or has increased and the individual is less capable of honoring any additional debt and is likely to negatively impact the CIBIL TransUnion Score.

(Contributed by Harshala Chandorkar, senior vice president - consumer relations, CIBIL)