Is Your Credit Score Not Looking Too Great at the Moment?

Awareness about credit scores, their utility and calculation is still low in India. However with the availability of free credit reports annually (if requested by individual), things could change for the better. So getting a credit report will not cost you anything now (unless you want to get more than four reports in a year) and it will allow you to assess your credit health regularly.

If you have recently checked your credit score because you need a loan or because you want to be credit healthy and it’s not good then read on, we have some useful information for you.

Probable Reasons for Your Score Not Being Great:

CIBIL score calculation is based on five factors, so a low score could most likely mean that you have not paid enough attention to one or more of them. So here are a few possible reasons that could cause your score to be low:

  • Irregular Payments: Paying on time is very important as it is the factor that influences the credit scores the maximum. Not paying on time frequently could single handedly spoil your credit rating, not to mention the huge amounts that have to be paid for fines and interest on overdue amounts.
  • Overuse of Credit Card: This may not seem like an obvious cause for the score not looking too good but credit card usage also impacts credit score calculation. Overuse of your credit card (more than 30% of the sanctioned card limit) regularly is indicative of over dependence on credit even if you do pay your dues on time and is not good for the rating.
  • Applying for too many Loans: Whenever you apply for a loan, the prospective lender seeks your credit report. This is known as a hard enquiry. All hard enquiries are reported in your CIR and too many enquiries in a short span are indicative of credit hungry behavior. Apply for a loan only when you are sure about meeting the eligibility criteria and when you absolutely need one.
  • High Proportion of Unsecured Debt: Loans may be secured (when they are backed by collateral) or unsecured (not backed by any collateral). A healthy mix of secured and unsecured loans makes for a healthy credit rating; a higher proportion of unsecured loans could cause the score to be low.
  • Settling an Account: If you have an unpaid loan or some old credit card dues and you are thinking about settling it then think again. Settling any account is sure to raise red flags in the minds of any future lender. Getting a loan for low CIBIL scoreis difficult but an account reported as “settled” is sure to make things all the more difficult. What’s more a settled account features in your credit report for up to 7 years.
  • Guaranteeing a Loan without being sure: This is something that you may not anticipate to be the cause of a low score. If you have guaranteed a loan and the borrower defaults on it, then not only will it be reported in his/her CIR but it will also be reported in your CIR. Thus your score will also fall, so guarantee a loan only if you are sure about the borrower’s capacity and intentions of repaying on time.

What Can You Do?

The remedy would depend on the cause of the low score. Credit ratings do not get better or worse in a month or two, they reflect your credit history and thus all your credit related activity impacts it. Some impact it more while some impact it less. So if your payments are irregular or if you use your credit card too much then you could start paying regularly and reduces your card usage. You will see a gradual improvement in your score.

If you have already settled an account then there is nothing that can be done except you need to make sure that you are a responsible borrower in future and you do pay your dues on time in the future. Similarly in case you have guaranteed a loan then make sure that the borrowers pay his/her dues on time. Refraining from applying for loans indiscriminately can also help if that is the cause of the problem.

Do remember that credit histories are made over a long period of time and there is no short cut to improving them. Thus if your score is not too good, it’s important that you identify the reason/s for it and the work on it while remembering that it may take time for it to actually improve; so you need to be patient and focused.

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Know the rules to repair your credit score quickly

When I am in the need of some cash liquidity and suddenly the loan gets rejected! What a nightmare. No sign of any help. can’t approach any of friends or relatives as my principals do not allow me. My credit card limit has been exhausted and I am just left with some hard cash with me. When I am thinking about the reasons for the rejection of my loan, I take all the minute details and rewind it in my head. Where did I go wrong?

The first thing I encountered was my credit score. My loans were getting rejected because my credit score was low. But then I thought, I have not taken any loan to date. Why is my credit score low then? All my information is correct. No identity theft issue with my report. I pay my regular credit card’s bills before the due date. I have always been the most responsible payer. I have no add-on cards which can make a possibility of default. While I checked my report, checking all the details, I came to know that while I was too young in my early 20s, I had applied for the credit card. I never used it but the yearly charges kept on adding and have become a huge default. Oh, Freak. How come I never noticed this? Now, when I am in a dire need of cash, all I am facing is rejection from everywhere. Just because many years ago I applied for a credit card and never bothered if it existed!

The above saying is of Amit, a responsible payer! What went wrong in his case? When we apply for a credit card, they have some annual handling charges. The amount can be as minimal as 500 Rs. But that matters. When we do not pay that amount, surcharges are added to it. Interest keeps on adding to it. And then it’s considered a default. Suppose when this gets to our notice, we clear out the outstanding without even settlement and pay the complete amount. The card is then closed. But what about the credit score? How soon will it be changed? When will the score go up? When will mistakes be removed?

When trying to increase CIBIL Score, always remember one thumb rule. Nothing changes overnight. Neither was a dip in your score overnight. Nor will increase in your score overnight. We have to be patient while any of these process. There are few of the options which can be used to make this process a little quicker. But again, nothing happens too quick.

  1. Secured Credits for short term
  2. Secured Credit cards

One of the easy and fast way to repair the credit score quickly is secured credit card. A secured credit card is the one where you keep an amount of money as a fixed deposit. You can use your credit card as normal. And pay when the bill is due. Supposing you fail to pay the bill on the due date, your bill amount from that fixed deposit amount will be deducted. When this process is done without any errors for few months, it shows your credibility and also how responsible the borrower is. Which helps in getting the score up in short span.

  1. Gold Loan

One more type of secured credit for a short span is a gold loan. Get the cash against any of your gold ornament for short span. Be a responsible payer, and keep paying the EMIs on time. Withing a very short time compared to others, your score will start boosting.

  1. Unsecured Credits for a short span.
  2. Credit Cards

When using normal credit cards, make sure you do not miss any payments. Use 30% – 40% of your credit limit. Even when you have the capacity of repaying the full credit limit amount, do not have this practice. It is a major mistake which people make. When more than 40% of the limit is used, causes a dip in the score. Make sure this is not the reason for your bad score. When the correct amount is used and repaid on time, even this would get the score up!

  1. Personal loan

Take a personal loan from either a Bank or NBFC which is for a short span. If any dues remaining of the previous loan, try clearing out all of them as soon as you can from this loan and parallelly pay this loan’s EMIs as well!

 

If done patiently and diligently, there is no scope that your score will not increase. Patience and Responsibility are two main things one has to keep while they are in the process to increase CIBIL score. Do not worry as there is a solution to everything!

How I got 800 credit score without any loans

Credit Score becomes an important aspect when it comes to taking loans or getting a credit card. Today, we have the facility to buy or get something which we once had thought of buying few years down the line. A vehicle, a house, a property or the higher education, anything can be conquered by taking a loan today than tomorrow. With few percentages of interest which you have to give it to the bank, you have the access to that amount of money much earlier than today! These amounts are quite big. When we talk about small amounts gold loans and credit cards are perfect examples.

As your score is majorly the reflection of how credit healthy you are i.e. how responsible are you for paying the credits you have taken, would determine the worthiness. When one had not taken any credit say in terms of card or any type of loan they do not have any score and is called a No History customer. And suppose one has taken any type of credit and when he/she pays the EMIs on time, is when the good score is built. But, what if one does not want to take any loan but still wants a good score? What is a good score? Any score which is above 750 of the range of 300-900 is considered a good score.

Let’s understand what Sahil has to say in achieving 800 scores without taking any loan!

Hi, I am Sahil from Delhi. I wanted to buy a new house. When I went to axis bank and inquired for axis bank home loan, to my surprise they asked me to first build the credit score. I had never taken any loan in past, neither did I owe any credit card. I am with dad in his business and never had any chance to go and take any kind of credit. I went home back and researched. How can I build my score?

Let me share my secret of getting 810 scores without any loan. So I read all the parameters of how the score is calculated. The 5 parameters viz. Payment History, Amount Owed, Length of Credit History, New Credit and Types of Credit. which makes the score was my whole Idea about how I was supposed to go! So I first started with a credit mix. I applied for 2 types of credit card. Secured Credit Card and the normal Credit Card. After a few months or regular use and payments, I applied for one more card. I made sure that I do not overuse my credit limit. I never used my card for more than 35-40% of its total limit.

The credit score is then achieved and reflected in the bureau report after 6 months. I checked my free credit score to make sure that what I was doing was correct and error free. I had maintained a good record and kept working on the same lines. In less than expected time, I was rewarded with my own hard work and efforts. My score was 810 and too without taking any kind of loan!

With Sahil’s experience, one thing what we can take is always to try working on the major 5 parameters of the score which determines it. Try paying the amount which is due on time, take credit but repay, do not take undue advantage, do not close old accounts, keep applying for new credits but do not act credit healthy and lastly have a good mix of secured and unsecured credit with a fixed or revolving type of credit mix. A healthy score will be no away from you!

My Credit Score Disappeared! Please Help

Is it possible for a person to have no credit score even when a few years before he had an excellent credit history? Can this change happen all of a sudden? What should one do if one finds himself in such a situation? Let’s get the answers to these questions.

As you may very well know by now, the credit score is a number that is generated based on the information that is recorded on your credit report. If you own credit cards or have taken some debts, then the lenders keep updating the information relating to your accounts to the bureaus. An impeccable payment history and a low credit utilization helps in raising the score. Information relating to late payments, too many debts, high utilization ratio brings the score down. But whether the information reported to the bureau is positive or negative it eventually falls off the credit report. In order to ensure that new positive information keeps getting added to your report you need to keep your credit profile active.

There may be situations like the ones given below, due to which your credit report wasn’t updated with new positive information. If such is the case, your score would show a downward decline.

  1. Overseas- If you travelled abroad for several years and closed all your credit cards and other debts before leaving, your credit history will start fading away. Credit bureaus in India only record information relating to accounts opened within the country. So if one plans to return back after a few years, and wants to maintain his CIBIL score, he must keep at least 1 account open and active, by charging few expenses every month and paying the full balance at the end of the billing cycle.

 

  1. No credit- If as a part of a debt management program, you decided to go all cash and stopped using credit cards or other debts, your credit score will start falling after a while.

 

  1. Using spouse’s credit- If after marriage, you closed all your accounts and depended only on your spouse’s credit, your own credit score will disappear over time. Without a good score, you will have a tough time getting approved for credit, in case you require it in future.

Check your free CIBIL report from the three credit bureaus and find out what your current situation is. If your credit score disappeared due to these reason, don’t despair. There are many ways to rebuild your credit history once again. But you will have to get back to taking loans and using credit cards. Here are some credit building ideas which can help you establish a good score once again.

  1. Secured credit cards- Without any credit score it may be difficult for you to get approved for usual credit cards. But in order to display good credit behaviour one needs to have an active account. A secured credit card is a good way to get a small credit line. You need to make a deposit to get this card, which basically serves as a credit limit. The deposit shields the card issuer from any risk of losing money due to non-payment of dues. Make regular on time payments on this card to ensure positive information gets recorded in your report. With a good payment history and low credit utilization you will see a raise in your score.

 

 

  1. Personal loans for low CIBIL score

Another way to build up on credit history is to take an instalment loan like a personal loan. There are many private lenders who given personal loans even to people with a low CIBIL score. They charge a higher rate of interest to cover up for the extra risk that they take to lend to individuals with a low score.

  1. Authorized user

If you become an authorized user on someone else’s card, the account information will be recorded in both the credit reports. On time payments and low utilization maintained by the primary card holder will benefit your score as well.

If you do not have any new account reported in the past 6 months, or an open credit account that is older than six months, your credit score will start declining and slowly disappear. That is why it is always recommended to keep old accounts active and open.

Will All The Credit Score Check Hurt Your Score?

There will be a lot of articles available on various websites which would give you a lot of information on how credit score works and how to maintain it. What many websites do not inform you are how your credit score gets hurt and what the factors which hurt your score? There are many factors which influences your credit score, building the credit score is rather hard than one mistake taking it for a toss. Your credit report will give you a clear idea on how you are doing financially and how other banking institutions look at you in terms of credit worthiness.

Imagine you are about to book your dream car, you have managed to save some money for down payment of your car. You are thinking of getting a loan as supplement for your vehicle purchase. Now, you are not sure what your credit rating is and if the credit report will help you get an auto loan. You plan to do a cibil score check before you apply for a loan but one of your relatives stop you from doing it explaining if you check your credit report you may end up hurting your score. You have less time to think about it and your dream to purchase that car starts to fade away. What would you do? Will you take the risk and check your score? Will your personal inquiry on your report hurt the score? Is yes, by how much?

There will be a lot of things which would run in your mind, especially when you have different opinions getting thrown at you. Do not worry, we are here to help.

First of all, let us just understand what influences your cibil score and what their shares are.

These are the main factors which influence your cibil report,

  • Your payment history (35%)
  • Number of debts (30%)
  • Age of your credit (15%)
  • Types of credits on your account (10%)
  • Credit inquiries (10%)

Yes, Credit inquiries have some weightage to your report, but this can hurt your chances of getting a loan harder than any other factors mentioned above.

There are two types of inquiries,

Hard Inquiry vs. Soft Inquiry

Hard inquiry

Whenever you apply for any type of loan or a credit card, the banks or the Non-banking financial corporation conducts background verification on you. With your residential, professional verification the lender also conducts verification on your credit report. Every inquiry made on your cibil report by the lender is termed as a hard inquiry which hampers your cibil score and you may end up with low cibil score. A hard inquiry stays on your report for 7 to 10 years which can be seen by your future lenders. If there are multiple inquiries made on your cibil report at short span of time, the lender may deny you a loan thinking you are not credit worthy this is why the past lenders did not sanction you a loan.

So the next you get a call from various credit card telesales department, understand that your yes to them will lead to hard inquiry and we all know the credit card companies are always strict in terms of verification and may deny you a credit card. You may end up having a hard inquiry on your report without a credit card in hand.

Soft Inquiry  

There are many individuals who know what the importance of having a good cibil score is. Many people check their credit score from time to time just to evaluate how they are doing financially and if they are credit worthy for future. If you, yourself are inquiring about your credit report, it will be termed as a soft inquiry. This inquiry also stays on your report for a very long time, but the lenders don’t mind soft inquiries. These days, there are corporate companies who check your credit report to check how you manage your finances so that they can offer you a job.

It is important to check your report from time to time so that you are ready with a strong report whenever there is a need of urgent loan in family. Not only for financial purpose, a strong report will help you in many ways in life.

Will my credit score be affected if I inquire frequently?

Taking loans to fulfil immediate financial requirements has become quite common. With this the importance of credit score has also increased manifolds. People have realized the importance of keeping the score high so that they get approved for loans easily, get the best credit card offers and the lowest interest rate possible. Even people who do not plan to take a loan in near future are keeping a check on their score, so that they don’t face any problems in future, if they need funds in case of an emergency.

Enquiring about your credit score helps you gauge your current situation, identify accounts that may be causing damage and find out ways to improve your credit profile. But some people have a misconception that such credit enquiries can damage your credit score. It is a complete myth that checking score frequently harms your score.  There are some credit enquiries that are not good for your score. But those are hard enquiries. When you check your score yourself it is known as a soft enquiry. Let’s explore what hard and soft enquiries are in more detail.

When you submit a loan application, the lender requests for your credit score and report from the credit bureau. They use this information to analyse your past borrowing behaviour.  Based on your score, they estimate the risk they are exposed to and accordingly decide whether to approve or reject the loan application. This score is also used to set interest rates and other loan terms. This type of enquiry made by the lenders is called a hard enquiry. All these are listed in your credit report and make up 10% of your score. While a single enquiry may result in only a slight dip, frequent hard enquiries indicate that you are applying for credit frequently. Such a credit hungry behaviour isn’t good for credit score. So one shouldn’t apply for multiple credit cards within a short span of time.

Soft enquiries include credit enquiry made by landlords, employers and insurance companies.  Since these situations do not lead to accumulation of debt they do not affect your credit score. Even the background check made by lenders for preapproval of loan is a soft enquiry. A check made by credit card companies to see whether you qualify for promotional offers is also a soft enquiry. Similarly checking your own credit report is also counted as soft enquiry. Soft enquiries are not listed on the credit report and they are not factored in credit scoring models. Hence, they do not affect score negatively.

In fact checking your score is a good practice, it is often the first step in improving it. It helps one do a reality check as to how one’s credit habits are affecting the credit profile. In order to encourage people to take their score seriously, RBI has mandated the bureaus to provide a free credit report every year. Checking the report frequently also helps in keeping problems like identity theft at bay. One must check the free credit report every year to uncover any mistakes or inconsistencies.

So go ahead and check your free credit report as and when you want to. It will not have any negative effect on your score. In fact you can get a free credit report from each of the three bureaus every year. So you can check your report for free thrice in a year. It is a good way to keep track of your financial health.

If there is a sudden drop in your score, it may be either due to recording of incorrect information or misuse of identity. One can report such issues to the bureau and ask them to rectify the mistakes. Taking a peek into one’s credit score also motivates one to take actions to bring positive changes to the score. If you are working towards improving score a regular check will help you see the results of your efforts.

Will My Job Hurt My Credit Score?

Money is an important aspect of life. You almost need money to complete every task in life. Where do you get the money from? That’s right, by doing a job. A good job can determine what you do, where you stay, what you wear and how your lifestyle can be. Your job can impact you in lot of ways both directly and indirectly.

Will it impact your credit score? Absolutely not! Your jobs, the designation, take home salary, bonuses, etc. does not get reflected in your credit report. This does not mean your salary does not have power on your loan buying process. For example, you are applying for a credit card; the lender will ask you for your annual salary to set a credit limit on your card. This way your job indirectly contributes when you apply for a financial product or a credit line.

So what exactly may hurt my credit score?

Payment history, debt levels, age of credit, types of accounts and inquiries on your credit report are the five main factors which contribute to your cibil score. Your employment status, your incomes and gains are never reported to the bureaus.

If unfortunately you lose your job for some reason, that can indirectly affect your credit score and you will end up on the loan defaulter list. Losing your job can be a saddest thing that can happen to you. You join a firm with a lot of confidence expecting your position will be intact, but when a bomb is dropped on you of unemployment, you are shattered everywhere.

Let us see how a job loss can indirectly harm your credit score,

Behind on loan EMIs and credit card payments

There is a famous proverb stating “Money brings Money”. When you happen to be in a job, there are a lot of bankers and card lenders who offer you different financial products like loans and credit cards. Though we know, they are just our want not need; even then we tend to go ahead with it. Because you have a stable job and a fat cheque, you start spending and get used to a lavish lifestyle. After losing your job, you realize that the EMIs are pending and the credit card bills are overdue and you have no money to make the payment. This will definitely result to a dip in your credit score.

Take new loans to pay your bills

Now that you know that you are in deep trouble financially after losing your job, you will opt for a new loan. A new loan will come with new terms and a new EMI, because it is an urgent requirement you may end up paying more processing charges than usual. You may also try to get in touch with your credit card vendor and ask for a limit raise. Limit raise totally depends on the sole discretion of the card lender, who will check your cibil score first and then think of giving you a limit raise.

 

Unexpected expenses

Trying to close one financial hole after another can be stressful but if in between this process something unexpected happens, like a family member needs medical attention then you are in for another problem in your life. This will result to you finding another loan to fill this gap.

A job hunt

Maintaining a good credit score is really important, even if you have lost your job. Many employers check your credit report to understand your financial capability and determine if you are job worthy. A bad credit score can cost you your next job. So no matter how bad your financial situation is, always pay all your debts on time.

You should always save money and keep some amount as reserve for unexpected events in life. Even if you lose your job, the reserve money can help you keep going for at least till the time you find another job. Spend less, always focus on what you need rather than what you want, this will definitely help you in long run to save money and live in financial harmony.

What Is A Credit Score?

You are planning to take a loan for the most favorite car you had thought once buying or a house you always had imagined or the business you wished to expand, would take you to a journey of going to banks, making inquiries, checking the best quote and the interest rate offered to you and then finally deciding which option would suit you the best in terms of tenor, rate of interest, processing fees and pre-payment charges. Now the point is, how do banks or non-banking financial institutions decide the rate of interest or other charges? What are the criteria?

Suppose you and your friend went to a bank. You both earn almost the same, your age is same, the family background is also similar. And you both apply for the same loan is the same bank. But you were offered 11.5% interest rate whereas your friend was offered 10.25% interest rate with little lesser processing fees and pre-payment charges. Now that would make you think if the external factor looks the same, why are the other things different? So you finally decide to know the details deeply of why your friend was given lower rates than you. And here would be the analysis of what you would get.

You had never done a CIBIL Score Check. Which is one of the major factor of the interest rates being processed? Lower the credit score more is the interest rate and vice-versa. The credit score ranges from 300-900. Where 300 is the lowest and 900 is the highest. Any sore beyond 750 is considered a good score. People below this score are considered red zoned, and the one above 750 are greed zoned. It’s not that, if you have a score below 750 you will not get a loan, but the % of interest will be higher. Now let us take into consideration that why is the score low or high? Basically, what are the factors that decide the score? There are 5 factors whose combination results in the score.

  1. Payment History (35%)

The major factor which determined your credit score is the payment history. How well-organized you are in making the payments of the credits you have taken, shows how responsible you are. Banks can make a note of your previous payments and decide if you will be an asset for them or not. If previously you have made blunders in payments or didn’t pay regularly, the score dips badly and makes it difficult for you to get a loan. If the score is not good, and it’s becoming difficult for you to get a loan; in that case, you can try for loans for bad credit. But ultimately the loss will be yours only.

  1. Amount owed (30%)

The total amount which is taken by you, in any means of the credit i.e. by credit card or a loan also has second major thing determined in the score. The amount of the revolving credit and the fixed credit is in the amount owed.

  1. Length of credit history (15%)

How long is your credit account active, and how old is your account also determines your score. Some people make the mistake of closing the older accounts thinking they are not of any use but that creates a dip in the score. So,  keep the accounts active.

  1. Types of Credits (10%)

There are 2 types of credit. Fixed or installment based credit and revolving credit with a mix of secured and unsecured credit. The type of credit you have will also contribute in the score. It’s healthy if you have a good mix of all types of credit.

  1. New Credit (10%)

The new credits you take is also a determining factor of your score. New credit means you are becoming more responsible towards your repaying responsibility. But do not overdo, else this would also hamper your score.

Always manage the credits you take responsibly. If you check your score and you feel there is some mistake, get a detailed report and check. Work with that diligently and patiently to get your score in green zone!

Why Should I Check My Credit Score?

While dreaming big, on buying things, it all revolves around how much money do you have. Nothing is for free! Whether you are planning for a house or a bike or a vacation or gold or the property, things are expensive. On a larger picture of say 10-15 years down the line, you see yourself achieving the dreams of properties or asset you want to acquire. But what if you want them now? The answer to this now is credit. Credits are available these days on an easy base compared to how they were earlier. The credits or the loans are a nice way of living your life now compared to how you had decided a few years down the line. Its not something that is offered to you for free. But it’s the plain logic of getting the amount of money in advance where you will repay it later with the interest on the amount. But in all, it’s a help which is to be got from banks or NBFCs or Private Lenders. It’s also safe to get it from a trusted party in order to get away from any chaotic situations later if you have borrowed the money from your friends or relatives.

How can one get these credits or the loans? With the standard procedures, you go to the bank, ask for the loan and know the details. The bankers would want to know the type of loan you want, amount of loan required and the tenure for the same. Once they get this detail, your credit score is checked. According to that, the loan amount is sanctioned and rate of interest is decided. Now banks can get the credit score when an applicant comes to them for taking a loan. But, is there any requirement for you to know the score?

Yes, it is really important for one to know the credit score. There are many reasons why you should know the credit score and check it periodically. Let’s look at them turn by turn.

  1. To stay credit healthy

                 We always take care of our physical health or financial health or emotional/mental health. But what is credit health? Credit health is a much talked upon topic these days. By the word credit health, means your credit report should be good. Your credit score should be 750 or plus. It takes efforts to stay credit healthy. You need to make proper payment on time of the credits you have taken from banks via loans or credit cards. You need to think and use the credit you have received else you can get into loan defaulters list. This is not much of a task, is it?

By checking your credit score regularly, you will come to know if your score is the same, or it has gone down or it has been increased. A regular watch will be an add on to the work you are doing in maintaining the credit health.

  1. To check if everything is in place on the credit report

                 If you have applied for a credit card, and it gets rejected saying your credit score is low. How would you deal with the situation? When you had checked the score last time, it was good enough and hence after taking a lot of time to think, you applied for the credit card. But what happened? It is advisable to check your credit score every 6 months. There can be a possibility if some one has stolen your identity, i.e. its an identity theft case wherein your details are used by someone to take loan and you are completely unaware about it. Or there are some mistakes in your report and you are clueless as you have not made those payments. So, in that case, you need to raise a dispute.

In any of the case, if your score is not reflecting how you had thought it should be, you have to check the score.

  1. Keeping an eye

Either you are new to the credit score or you are trying to repair the credit score, in either the case it is important to check the credit report regularly. RBI has passed a rule of giving 1 free credit report per year to any individual to all the bureaus. Make the use of such advantage and keep an eye on the score.

In any of the cases, to stay updated is best. If you are going through a new built or repair, regular checks are important. Don’t be lazy in such things and stay credit healthy!

Will Arranging My Debts Help Boosting My Credit Score?

A credit report provides a comprehensive picture about one’s credit position. The credit score which is an important part of the report factors in various variables when calculating the score and this rating helps in predicting an individual’s creditworthiness. In case you have a low score then there could be a variety of reasons for it and depending on the problem you can solve it using various solutions. Arranging your debt can help you in boosting your credit score. Let us consider a few ways in which arranging yore debt can give a boost to your credit score.

  • Consider Balance Transfer:

Balance transfer is an option that can help in better management of debt. This option can be useful both for home loans and in case of piled up credit card debt.

Home Loans run for long tenures and it is possible that during this time the interest rates change a couple of times. If you realize that the loan you took years back is at a higher rate than the current prevalent rate for home loans in the market then you could consider getting a home loan balance transfer after weighing the costs and benefits. A lower interest rate could help lower you over all liability and you may find it easier to pay your reduced installments in case you are struggling with the repayment. Longer loan tenure if agreed by the new lender can also help you in repayment.

Credit card debt is the most expensive form of credit. If you are struggling with repaying your credit card dues then balance transfer could help you. In this process you transfer your unpaid dues on one card to another card (preferably one that charges a lower interest rate), the new card company provides some interest free holiday before you need to start repaying your dues which can help the card holder. The acquiring card company may also allow repayment in EMIs which can help in boosting your score.

  • Fore-Closure Could Help in Certain Cases:

All loans and credit card dues are included in the CIBIL Report, one aspect that influences credit score calculation is the balance between secured and unsecured loan. In case your unsecured loan (personal loan, credit card dues) burden is higher than secured loan burden then it could impact your credit score negatively. In such a scenario fore-closing these (unsecured) loan could help in boosting the credit score. Though loans that run the full course are better for the credit rating in the long run but in some instances a prepayment may help.

  • Prioritize your Debt

Needless to say repaying all your dues on time and regularly is important. However if you have too much debt and are struggling with repaying them then you must consider prioritizing the repayment. Repaying one which has the highest interest burden could be a good way to start. However it is important that you list out all your debt along with their interest, overdue amount and remaining amount. If you find it tough to repay all you monthly dues then you could talk to lenders and request a loan restructuring. Here the loan tenure is increased which lowers the EMIs and makes it easier for you pay your monthly dues. You aim should be not to allow interest fee and penalties to add to your debt burden. This is definitely not one of the ways to improve credit score fast but could give you results in the long term.

Ideally one should not reach a position where their debt burden becomes so high that they find it difficult to repay their monthly dues. However in case this does happen then you should consider rearranging your debt in an attempt to better your credit rating.