The Laziest Way to Improve Your Score

There are a lot of things in life which you want to do. There are many of us who try to find the easiest or let’s put it this way find the laziest way to do things.

There are a lot of people who spend a lot of their energy in maintaining a good credit health and find ways sitting online finding solutions on how they can improve their score. Most of us know why we should maintain a good credit score and how that can help us the long run.

But is there a laziest way to improve your credit score? Well we have good news for you today, yes! There is a lazy way to build your credit score positively.

Usually a credit score is a number which ranges from 300 to 900. If your score is anywhere ranging between 750 and 900, it is considered to be a great cibil score. This score range can help you get any type of loan in no time. With such score you can opt for maximum amount of loan sanction and also can negotiate further with the lender on interest rates and processing charges.

A good credit report will add good value to your financial lifestyle if adhered properly. An individual with good credit report enjoys a lot of privileges offered by financial institutions and lenders which helps the individual in long run.

Here are easy ways to improve your credit score,

  • Older the account, better

The age of your credit roughly contributes 15% of your overall cibil score. The credit bureaus always give priority to applicants who have longer credit reports. Would you lend money to an individual who just started or someone who has a credit history of 10 years?

A bonus tip would be to never close a credit card account if you have one. Just try making small transactions every month and make the payment on time, this will help you to improve the score and also will make the account old. This will help you get your cibil score up.

  • Let the bank make your payments

There are a lot of promotions going on in today’s market which endorses auto payments. If you have different loans on your account, you will have to make all your payments on time. What better way to opt for auto payments. In such scenarios the bank will take care of your payments, you just have to maintain sufficient balance. This service is absolutely free of cost and you do not have to worry about EMI dates, the banks will take care of it.

Making payments on time contributes a whopping 35% of you credit score.

 

  • Stop credit hunting

Do not fall for the tele calling companies who call you explain great offers on loans and credit cards. We always fall for such gimmicks and end up making a hard inquiry on our credit report which then hampers the cibil score.  These hard inquiries made by different lenders remains on your report for two years and when in future you genuinely apply for a loan, these may cause you problems. Credit inquiries accounts for 10% of your cibil score.

You can get your credit score a boost without even making inquiry. Only inquire when in need, do not fall for mouthwatering offers by lenders.

  • Piggyback

This is the easiest way of all. You can improve your cibil score by becoming an authorized user on someone else’s credit account, this is called piggy backing. If a family member like father, spouse has a good credit history, you can tag along with them becoming an authorized user for their account and this will boost your credit score. This is like an ultimate trick used by people to get their credit score up in no time without any efforts.

Just make sure the lead account holder makes all their payments on time and maintains a good credit health, or else this practice can also turn out to be dangerous as the lead with hampering their own can hamper your cibil score as well.

If managed correctly a credit score can do a lot of financial miracles in your life. Mantling a good cibil score is no rocket science, all it needs is good financial integrity which will help you in long financial runs.

Advertisements

Age Of Free Credit Score: True?

From January 2017, the Reserve Bank of India made it mandatory for all credit rating agencies to provide a credit report without any cost once a year when a request is made. This means the agencies have no obligation to provide a report themselves, thus if you need a report then you have to expressly make a request as per the guidelines laid down by the agency to get it. Well, does this guideline by the RBI actually translate into free credit score for all those who require?

How to Get Your Free Credit Score?

There are four credit agencies that provide credit reports for individuals in India and each has a different process for getting a credit report. Let us have a look how you can access your free credit score from each one of them:

  • Transunion CIBIL: If you want to get your free score from CIBIL you can do so by visiting the website where there is a link at the bottom of the home page for getting a free report. It’s a three step process, the applicant needs to fill a form where basic details need to be filled and then answer a few additional questions for authentication purpose. Post the details being verified the applicant can access his/her report.
  • Crif High Mark: They also have a link for getting the free score; it is on the left side bar of the home page. The first step is to fill in basic information, here the information required is more detailed, after filling the form the applicant chooses his/her order, then they authenticate themselves, after which they can download their report.
  • Equifax: If you follow the link that is displayed for getting a full free credit report you are directed to a set of guidelines where you are instructed to download an app for the same. The applicant will need to login to the app using a temporary PIN, authenticate themselves and login again after 24 hours. You are given four attempts to answer three questions related to your credit history; once you have completed all steps successfully you get the report on your phone. Those who do not have smart phones can get the report by sending a scanned copy of an identity proof and address proof along with the application form at the mentioned email id.
  • Experian: There is no separate link for a free credit report but once you click on the link for getting a report, it takes you to a form where you fill in details as required, get an OTP and then generate a password. After this, you can almost immediately access your report.

So is it Really the Age of Free Credit?

Yes, it is the age of free credit. Each organization has a different process, for some, it is slightly cumbersome and for others, it may be simple and quick. Irrespective of that fact, all rating agencies do provide a free credit report almost immediately or after some delay. If the process is followed the applicant can access their reports if they wish to do so.

Since there are four rating agencies, effectively one can get four credit reports in a year which makes one report each quarter. In case someone wants more reports than that (which is unlikely) then the option of getting it free might not be there.

So what does it mean for you?

Being updated about your credit health has many benefits. It allows you to spot any errors in the report and get them rectified if required, you can improve CIBIL Score by assessing the reason for it being low, and looking at report can also help you detect signs of any identity theft if it happens. Checking your report has many positives, now it costs nothing and it also does not lower your score.

So it’s up to all of you out there to make the best of the situation and stay credit healthy by checking your credit score regularly and that too without paying anything!

 

What Credit Scores Should I Avoid?

There are four credit rating agencies that score individuals on a score of 300 to 900, with 300 being the lowest and 900 being the highest. CIBIL being the first rating agency is almost synonymous with credit scoring in India.  The importance of credit scores has been growing over the years and so has an awareness to an extent, however, a lot still remains to be desired in the area of awareness about credit rating, their importance and what constitutes a good credit score. Here we try and explore the importance of credit score and what credit score should be avoided and for what reasons.

Importance of Credit Scores:

Unlike before when loans were sanctioned based on the referrals by account holders or the bank’s manager’s discretion now a more objective process is followed. This process involves the applicant meeting the eligibility criteria which also entails that the applicants have a basic credit score. Though lenders do not put it in their eligibility criteria a range or a number for the credit score, below which they will not accept a loan application but it is the first step in the application scrutiny process.

Each lender may have a different threshold for the credit score, below which they might not accept the loan application; it also varies as per the loan type and other factors too like the employment record and so on. The lenders might be more flexible if the applicant is employed with an organization with which the lender has a tie-up or in case of secured loans.

However, despite some variations that may occur in the acceptable level of the credit rating that maybe be acceptable for getting a loan, its importance in the loan application process is definite. So it is a good idea to access your free credit score from time to time and assess your credit health from time to time.

The Scores to be Avoided:

As we discussed in the first paragraph the scores can range from 300 to 900; most loans are sanctioned to those applicants who have a score equal to 700 or above 700. Thus ideally any score below that is avoidable but as we said loans are given based on many factors and credit score is one of the most important factors amongst all these aspects that influence the credit sanctioning process. A good credit score does not ensure that a loan will be sanctioned (in case documents are not complete or other eligibility criterion is not met) but a low score will definitely ensure that the application does not go beyond the first level of scrutiny. So what scores should be avoided:

Score between 700 and 750:        Acceptable

Any score between 700 and 750 is perfectly acceptable in most cases and almost all lenders will be willing to extend the loan to the applicant. However, if it is an unsecured loan of big ticket size then the lender might want to take some extra steps to establish the suitability of the applicant.

Score between 550 and 700:        Avoidable

This is a score that is definitely avoidable as it reflects irresponsible credit behavior. Lenders will be willing to lend to an applicant with this score only after taking some steps depending on how low the score is. Lenders may seek a guarantee or collateral or may lend at a higher interest rate. Working in an organization that has a tie-up with the lender may help in getting the loan sanctioned. In such a scenario if will be better if the applicant tries to increase CIBIL score before applying for any loan.

Score between 300 and 550:        Highly Avoidable

Needless to say, this is a position that no one wants to be in. With such a score it is almost impossible to get a loan from the organized lending sector. This indicates very irregular repayment history and maybe loans have been written off and so on. If one has this kind of score then it makes no sense for them to even think of getting a fresh loan, they should focus on first on improving their credit health.

Avoid any score below 700 as it is not about getting a loan sanctioned but it is also reflective of the overall credit health of a person.

 

How Will Mistakes Be Removed From Credit Report

One day, you plan to take a look at the most talked upon topic amongst your peers. The Credit Report. This is the first time you are looking for this report as some one told you that it is advisable to have a cibil score of 750 points to get better interest rates on loans and easier disbursal of it. You research a few website and you come to know that you can get a free credit report once a year. That adds a Smile on your face, as what you heard about the reports being expensive to fetch, the myth broke!

Now, while the process of applying for a free credit report, there are a lot of thoughts coming to your mind. What will be your score? How will it help you in getting better loans? What if your score is not good? What if you are in loan defaulters list? What if there is no score? Take a break! Know the basics of credit score. How is credit score calculated, various parameters of the score, what can take the score down, what are the mistakes one should not make, how to remove mistakes if already done?

Let us first know the Mistakes that can be reflected in Credit Report :

  1. Errors or the Report
  2. Things that lower the score
  3. Parameters on Which the score is calculated

Errors On The Report :

There are Major and minor errors which reflect on your report. To list a few; we have When the account you have asked to look into, is not your account, or PAN card is not updated properly, the account status is falsely updated, or there are ownership issues with the account, salary or date of birth or address is not updated or wrongly updated.

While you fetch the report, always check if your details updated are correct or not. If any issue, do follow the concerned department of the credit bureau and get them rectified.

Things that lower the score :

  • At times, a person does not pay the credit card bill, or he does not pay a few EMIs of his loan, and the interest keeps on building. At these time, to complete or close an account, the bank offers a lumpsum amount to the customer. While the customer pays this settlement amount, the loan/credit card outstanding vanishes, but it affects the score. If you are in one of the above mentioned conditions, try to completely pay the balance and not the settlement amount.
  • If due to some mishappenings in your financial conditions, you and the bank/NBFC agrees upon a loan tenure or EMI structure to be altered, you feel happy about it, but do not put the blush on too much as this also affects your score.
  • If because of any reason, the lender has filed a case on you, or u have put off your hands on payments, would also lower your score.
  • Bankruptcy also is a huge black spot on the credit score and requires almost a decade to get it off from your credit report.

Parameters On Which Score Is Calculated :

This is to be taken care of the most, so that you do not make any mistakes or if they are done, you rectify them!

  • How are payments done in past? If you have made payments on time, or if the are delayed. If they are delayed, then what was the reason for the delay and how long was the payment delayed, this is one of the parameters on how the score is calculated.
  • When a loan is taken or a credit card is applied, the payment methods are specific. Some have fixed payment module and few have a revolving payment module. For a good credit score, you should have both!
  • The total age of your account (loan or card) is a huge benefit on the score. Older the account and clear are the payments, Better is the credit score.
  • If, in any case, you apply for too many new credit cards or loans, that is taken as credit hungry behavior, and can take your credit score tremendously low!
  • If you have many accounts which are not paid on time, make sure you start paying them as soon as possible, else it will also wreck your score.
  • Debt to income and income to expense ratios generally checked by the lenders while giving a loan to the customer.

The above given information is on how and what to check and do to increase the score or maintain the current one. Also, there are different places where its mentioned how not to fall in a trap to avoid the dip in your score. However, If there is any place you have missed which might take your score down, do not worry! Have patience, and work on them. If you are unable to understand, consult a credit counselor and take the help! Remember “A Wise Person Is The One Who Takes Help When It’s Most Required”. So, do not feel ashamed, to ask for help in rectifying the mistakes which you want to get removed from your credit score.

How Important Is One’s Credit Score?

Indian loan market has seen a rapid growth in recent years. Gone are the days, when people used to take loans only in times of financial crisis. Declining interest rates and flexibility to repay have made loans an attractive option to fulfil one’s needs today and repay the amount in equal monthly instalments. With this trend, credit scores and credit reports have also gained importance. People are waking up to the fact that scores affect many aspects of their financial life. So many people who have a low CIBIL score are now taking steps to improve and maintain it. They check their free credit score from all the three credit bureaus to keep track of their credit health. But is CIBIL score only a matter of concern to people looking for loan approvals. No, the importance of score goes much beyond that. But before we delve into that lets understand what a credit score is.

Three credit bureaus in India CIBIL, Equifax and Experian compile financial data shared by the member banks and other lending institutes relating to the credit taken by each individual. These bureaus prepare a credit report for each individual, which basically reflects your credit card and other loans repayment history. Based on your credit card usage and repayment track record the bureaus calculate a credit score. The way your marks had determined your level of knowledge in school, in the same way, the credit score determines the risk factor associated with a borrower.

Here are some places where your credit score will be evaluated

Loan approvals- Checking your credit score is one of the first things that lenders do to evaluate whether you are worthy of giving a loan. A high score helps in gaining lender’s trust and assures you of easy approvals. A low CIBIL score indicates that you haven’t dealt with your past debt obligations responsibly, hence lenders feel wary of lending you money. Even credit card approvals and credit limits get affected by your score. Hence a good score comes in handy in obtaining any kind of financial assistance.

Interest rate- An excellent CIBIL score not only helps in getting loan approvals, it also helps in bargaining for a better rate of interest. Lenders are ready to cut down on interest rates if the past records show that you are a diligent and responsible borrower. A low score costs you a lot, as banks charge a high interest rate to cover the risk that they are taking by lending you money. Hence your monthly interest outgo is directly impacted by your credit score.

Employment- Unheard of a few years ago, it is now increasingly becoming a common practice to check the CIBIL score of prospective employees. Credit checks are now an integral part of the hiring process  for jobs in the finance sector, or positions which require a person to handle company’s money. It is basically done to ascertain whether you are responsible in handling money. So if you are looking for a job, check your free credit score to see that your credit profile is in good shape.

Insurance premiums- Whether you are buying a home insurance or a car insurance your score will play an important role in determining the insurance premium that you pay on it. A low score can cost you thousands of rupees more than someone who has an excellent rating.

Renting property- Your CIBIL score can influence the rental opportunities that you have, as many landlords too check your score before letting you out their property. A landlord may not want to take the risk of not getting paid by renting his property to a person with a low CIBIL score. They want to be sure that they get their rent on time, so they prefer renting to a person with good credit who has shown responsible behaviour in the past.

You can order your free credit score from any of the bureaus once every year to monitor your credit situation. An excellent credit rating is anything higher than 750, but even if your score is between the range of 700-750, you can easily qualify for loans and bargain for low interest rates. A score less than 600 is considered as a low CIBIL score. If you fall into this category don’t lose heart. You can still get your financial life back on track if you take conscious efforts and work towards improving CIBIL score.

How is my Credit Score Determined?

A credit score plays an important role when you apply for a loan or any line of credit. It’s a three digit number which is used by the banks or lenders to evaluate whether or not they should sanction your loan. It is important to understand what your credit score is before applying for a loan, so that you have an upper hand in loan negotiations i.e. interest rates, processing fees etc.

Imagine you have applied for a loan and your loan gets rejected. You have been told to apply for a loan after you build a good credit score. Many questions will cross your mind like, what is my credit score?  How to check cibil score? How do I improve it? Now this is the tricky part! A credit score is a compilation of a lot of factors associated with your financial things.

Today we will set sight on how a credit score is determined,

Payment History

The most important factor which contributes to your cibil score is your payment history. It accounts for 35% of your score. It is a compilation of factors like : your account information, any default payments, how long the default payments are carried forward, if you have filed for any bankruptcy in the past, etc. If you would like to see a good hike on your cibil score, you should make regular payments to the lenders and make sure you do not have any default payments.

Your balance payments

The credit bureaus have each and every financial detail of yours. They monitor your financial activities on regular basis. Your credit score also gets influenced by the amounts owed by you to the banks or lenders. For example, you have a credit card and its limit is around 1 lakh rupees, imagine you have spent a fortune on the same and when the due date arrived, you converted a lot of transactions into EMIs. This way you have blocked your limit at the same time you owe a lot of money to the bank and the same is reported to the bureaus. It contributes a whopping 30% to your cibil score! It’s better to spend less rather than spending more and facing financial instabilities

Length of Credit

Building a good cibil score is a lengthy process and you need to start somewhere or the other. Once you have applied for a loan or any other financial product like a credit card your transactions start getting recorded with the bureaus. Various accounts have different accountability to your score. For example, if you applied for a home loan, the loan account will be active for at least 15 years. On the other hand a car loan lasts maximum for 5 years. Let’s take a credit card for example. It does not have an account expiry date and you can use the same, until the time you don’t want to close it. It contributes 15% to your credit score. In any case, do not close your credit card account, as that will influence your score under payment history section.

Number of inquiries

We understand there are a lot of financial products available in the market. Some of them so mouthwatering, you would definitely like to get it. Did you happen to know, for each financial product inquiry; your cibil score is being checked? The more inquiry you make with the bureau, the more your chances are to get your cibil score down. As there are a lot of products in the market, only go for the product which is tailored to your need and try making fewer inquiries with the credit bureaus.

Types of Credit Used

There are various credit accounts with which you can be associated with. The cibil score is also determined with the types of credit accounts you hold like, loan accounts, credit cards, etc.

This is just tip of the iceberg as far as credit score goes. It is important to know all these factors and how they contribute to your cibil score. But what’s more important is how you are managing your finances. The more you are financially responsible, the more you have chances of getting a loan without any hassles.

4 Different Credit-Scores You Should Know About

The first rating agency in India was established in the year 2000, which makes the history of credit health assessment in India less than two decades old. Since then three more credit rating agencies have been set up in India; thus now there are four different agencies then rate individuals based on their credit behavior and credit history. Although while the basic tenets of rating remain same, there might be few differences in their scoring model and also some other aspects. When you seek a loan, the prospective lender can seek the credit report from any of these four agencies. Thus it is important that one knows the basics that pertain to these different scores that one may have.

What’s in a Name?

The lender can seek the credit report from any of the four rating agencies to judge the credit health of the applicant and scores from all of these are valid. The rating by all agencies is done based on five factors that includes : the repayment history for paying credit card dues and EMIs, hard inquiries made by lenders, credit utilization, credit mix and the length of the credit history. The information supplied to all the agencies by banks and FIs are also same. However, there still might be a minor difference between the scores of all the four agencies due to the weightage that might be given to each parameter which may cause a variation of 5 to 10 points between scores of two different agencies but not more than that.

However, if you follow the basic tenets of being a responsible borrower then you will have a healthy score across agencies and if you want to increase credit score be sure to check what is included in the score calculation. When lenders seek a report from any of these agencies they are aware of the difference in the rating models of each of them and they will keep this in mind when evaluating the CIR of the customer.

As per the RBI guideline, all rating agencies have to provide a free report once a year to all customers who ask for it. The cost of getting the reports (mentioned below) is if you need another report after getting your free one in the same year.

  • TransUnion CIBIL Ltd:

It’s only fair that the first credit rating agency we talk about is TransUnion CIBIL. CIBIL was set up in the year 2000 and was given a license by RBI in the year 2009. TransUnion acquired an 82% stake in CIBIL in 2016 and hence it is now known as TransUnion CIBIL.  The score ranges from 300 to 900.  You can get a report and score by paying Rs. 550; you also could opt to take the option twice or four times in a year or just get the report for Rs. 159. Report is sent in 7 to 10 days; if online verification is successful then you can do a CIBIL score check through email too.

  • Experian Credit Information Co. of India Pvt. Ltd

This rating agency was set up in the year 2006 and was given a license by RBI in the year 2010. The rating agency had a different range of scoring but now they also score in the range of 300 to 900. The report can be sought by paying Rs 138 or the report and score both can be bought online by paying Rs. 399. If you send the request online you can receive the report immediately via email, an offline request may take up to 20 days.

  • Equifax Credit Information Services Private Limited

This agency received its license in 2010 and it also scores between 300 and 900. Basic report and credit score can be obtained by paying Rs. 138 and Rs. 400. Reports are sent within 7 to 10 days of the request being sent.

  • CRIF High Mark Credit Information Services Pvt. Ltd

High Mark was established in 2007 and received the license from RBI in 2010.  High Mark also had a different scoring pattern earlier but now just like the other three agencies above their scores also range from 300 to 900. You can get the report and the score by paying Rs. 399.

All the agencies have a defined and well laid out dispute resolution mechanism. So if you find out there is a difference of 50 points or more between score by two agencies be sure to find out the reason for this discrepancy.

3 Credit Myths that can destroy your score

Credit history affects various financial aspects of our life. It is crucial to understand what credit score and reports are, how the score is determined and how one can maintain a good score. There is a lot of information available to guide you to towards a perfect credit score. But do not believe everything that you hear. There are many credit myths that are also doing the rounds. One wrong step can lead you in a wrong direction. Do not get misled by such myths that can actually tank your score.

 

Here are some misconceptions that can harm your credit score. Beware of them and get to know the real facts.

 

Myth 1 : Closing credit cards will improve credit score

 

Some people believe that having a number of credit cards has a negative effect on the credit score. They believe that closing some old unused credit cards will help in raising the score. But this isn’t the way credit score works. One of the major factors that determine your score is the credit utilization ratio. It is the amount of credit you use compared to the total available credit limit. For a good CIBIL score you should have high credit limits and you should use not more than 30% of it. Closing credit cards will reduce your total available credit limit and increase your utilization ratio. This will drastically reduce your score. Closing old credit cards also affects the “length of your credit history” factor that impacts  one’s credit score. It reduces the average age of accounts and hence brings down the score. So if you really need to close some cards, close the newer ones. Another option is to close cards with a lower credit limit. Do a CIBIL score check to ensure that the impact of closing the account isn’t too drastic. Also, note that some credit card companies cancel the card if it is inactive for a long period. So charge small expenses to keep the card active.

 

Another misconception regarding closing credit cards is that if you close a card with a bad credit history, the information gets erased from the credit report and your credit score improves. The reality is that you cannot erase  credit card’s history recorded by the bureaus in your credit report just by closing the credit card.

 

Myth 2: Not using credit cards is good for CIBIL score

 

You will see many tips on improving CIBIL score that advises people to pay off all their outstanding balances and stop using their credit cards. They proclaim that going on all cash basis and staying out of debt will help improve your score. But infact such a decision can be destructive for your score. In order to have a good CIBIL score, one needs to show how well one is capable of managing revolving accounts. For this one needs to keep the credit cards active by charging expenses and then paying them off every month. Even if you have a mortgage or any other instalment loan where you are making payments diligently you will not have that perfect score if you do not use credit cards. That’s because the CIBIL score calculation also takes into account the credit mix. A person who displays responsible behaviour in using both types of accounts will have a better score.

 

Myth 3 : You need to carry a balance on the credit card to raise your score

Using the credit card is necessary to build the credit score, but carrying a balance is not. You can work towards a good score if you pay off the entire amount when the bill arrives. By carrying a balance you will have to pay a high interest rate on the outstanding amount. This isn’t required at all to show that you can handle credit responsibly. In fact, paying off the entire bill amount will help in keeping the utilization levels low which is good for your score.

 

Hope this article cleared up the mystery that surrounds the CIBIL score. You will now have a better understanding of how the CIBIL score calculation works, and what you should and should not do to ensure a good score. But what if your score already took a hit because of these myths that you carried in your mind for long? Not to worry! If you are in need of funds you can avail for loans for low CIBIL score offered by many private lenders in the market.

What Do the Credit Score Numbers Mean?

A credit score plays an important role when it comes to opting for a loan or a line of credit like a credit card. Credit scores are used by lenders and various Non-banking financial services to evaluate your capability to avail a loan and make decision whether they can offer you a credit. The score is a result of your payment patterns, any default payments, any past settlements and many more.

There are many different scores which are available in the market for the lenders like Experian, Equifax and so on but Indian banks and non-banking financial services companies prefer CIBIL as their lead bureau for credit scores. Credit Information Bureau India Limited also known as CIBIL was founded in year 2000. It helps providing credit information to Indian banks to filter loan applications.

There are different categories of cibil score which helps boost your loan application and also gives you added benefits while availing a loan. The score ranges from 300 to 850, each financial transaction either contributes or downturn your cibil score.

Today we will sight the score breakdown and help you to understand what the credit score mean,

Score 0-349

If your credit score is between 0-349 this means you have no lending record. Many of us think to make our purchases on cash and do not take loan for any purpose but a no cibil score is equivalent to a bad cibil score. Always try getting small consumer loans from time to time and make regular payments on the same to see a great hike on your score. This will help you get started with the process and in future if you need a bigger loan like a home loan or a personal loan you will be able to avail a loan with ease.

Score 350-650

If you are in this category of credit score, most probably you have made a lot of financial mistakes like not paying your dues on time also if there is a settlement in your account. This will definitely hamper your chances of getting a loan in future. If you have not made a payment on time the transaction remains in your report for at least 5 years. A low cibil score will always pull you backwards from financial harmony, if you need help with repairing your credit, you can always approach a financial professional.

Score 650-699

This is termed to be a safe zone and you need to work hard to reach in the good score range. If you are in this category it is much likely you will get a loan but chances are you will need to pay much higher interest rates as compared to other options available in the market. Try not to default any loans further and you credit score will be up in no time.

 

 

Score 700-759

This category is called the safe category. In general terms you can easily get a loan from any lender without any hassles. This indicates that you make all your payments on time with almost no defaults and also your credit balances are low. If you are applying for a loan, you will get high priority as compared to others and you can also negotiate on the interest rates offered by the bank.

Score 760+

We can say that, very few people achieve this milestone. You can be in high demand between lenders if you fall in this range category. This credit score range means you have financial integrity and do not default your payment even by mistake. You have a long history of line of credits without a single default. They receive the best offer available in the market and also can negotiate with the lender on interest rates, processing fees and so on. It is really hard to achieve this breakthrough, but is even harder to maintain the same.

A credit score states a lot about you when it comes to financial integrity and how you manage your loan funds. It is a ladder you can use to achieve financial milestones and achieve an easy credit in desperate times, but the same factor can be the worst nightmare of your life and can haunt you for a very long time. Borrow responsibly and repay well to live in financial harmony.

4 Things which look harmless but can hurt your score

A credit score affects one’s financial life in numerous ways. We all know that missing a credit card payment or loan EMIs will damage our credit profile. But there are some things that look harmless but can have a drastic negative impact on our score. Avoid these financial decisions to avoid unexpected surprises.

Co-signing a loan – If your friend or a family member is not able to qualify for a loan, you may not find any harm in co-signing a loan in order to help him. However one needs to understand the financial implications of such a decision. Co-signing a loan has almost the same effect on your credit score as signing a loan oneself. The co-signed loan account will appear on your credit report like any other debt. By co-signing a loan you become legally responsible for paying the loan EMIs if the primary borrower fails to do so. If the primary borrower makes a late payment or misses a payment altogether then it will affect your credit profile as well. Co-signed loans are considered while calculating your debt to income ratio even if they are being paid on time. It reduces the lender’s perspective of how much you can afford to pay back and hence reduces your ability to borrow funds. So if you are planning to apply for a home loan in near future it is better to avoid co-signing for others.  If you do co-sign a loan and take a risk of its implications it is imperative that you check your credit report and score regularly. Keep track of how the co-signed loan is affecting your credit score.

 

Closing old credit card accounts – Sometimes in an effort to clean up credit reports and take control of one’s finances, people close their old credit card accounts that they no longer use. But doing so affects the score negatively. Credit utilization ratio that is a major determiner of CIBIL score is calculated by dividing the total credit card balances by the total available credit limit. Closing old credit cards, reduces your available credit limit and hence increases your utilization levels. This has a major negative impact on the credit score. Length of the credit history also affects one’s score. Old accounts help in raising the average age of your accounts that is good for the credit score. Closing them will reduce the average age of accounts and lower your score.

Paying off an old charge offs- It may be hard to believe but yes, paying off old charge offs can actually reduce your score than increase it. Charge off accounts are those that you haven’t paid and the lender no longer expects any further payments on them. Payments on these accounts will reactivate them and make them appear more current. The collection agency may report it as a new debt than a written off debt. As new accounts have a greater weightage during the credit score calculation, paying written off accounts can bring a drop in your score.  Make sure you do not do any such mistakes before applying for a home loan. Even a few points of score can affect your home loan approval process.

Pushing credit limit- We all know that credit utilization has a major impact on our credit score. That is why it is advised to keep this utilization level below 30%. But what many don’t know is that paying off the balance in full each month may not necessarily mean that you have low utilization levels. If you are in a habit of maxing out your card often you may have high utilization levels that maybe affecting your score negatively. The balance that is used to calculate the credit score is your last statement balance. So if you have charged an amount close to your limit, you will have a high credit utilization ratio. Such over dependence on credit impacts your score negatively.

People who have been diligently paying off their debt obligations can also have a low credit score if they make some of the above mistakes. If you find yourself in such a situation do not despair. You can still apply for loans for bad credit where lenders do not just go by a theoretical evaluation of score. They weigh several other factors to determine your eligibility. So if you are an otherwise responsible borrower, but your credit score took a hit because of the above reasons, you can easily get approved for loans for bad credit.