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 :
- Errors or the Report
- Things that lower the score
- 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.