Mistakes to Avoid When Building Credit History

If you want to be responsible towards your financial security, then it’s important that you build a high credit score with the help of good credit history. However, in that endeavor, you want to be careful with your actions and avoid the common mistakes that people commit only to hurt their score. These are:

1. Closing Old Accounts

It’s true that with few bank accounts and credit card accounts you can manage your finances easily and get the desired results faster. However, if you have to close a few accounts, then picking the old ones can do more harm than good.

Here is the thing- the length of credit history plays a huge role in your credit score calculation. In other words, your oldest accounts make a bigger contribution towards your score in comparison to your recent accounts. So, if you have to close an account, it’s best to choose one that’s relatively new.

2. Late Payments

Late payments, whether we talk about personal loans or credit cards, are never good for your credit rating. In fact, the majority of top credit bureaus such as TransUnion CIBIL, Equifax, High Mark, etc. give the highest weightage to the payment history when calculating your credit score. So, if you miss only a few payments, then your credit history will stay good. However, if you fail to make the payments on time more often than not, especially in multiple accounts, then you can expect a huge damage to your creditworthiness.

3. Increasing Credit Utilization

You may have a reason to believe that increasing credit card usage i.e. credit utilization can help to build a high credit score faster. On the surface, that seems logical, after all. However, that’s not how the system works.

Higher credit utilization doesn’t have any impact on the credit rating growth. In fact, if it’s above 35%, then it can easily cause damage instead. This is because the credit rating agencies associated high credit utilization with “credit hungry” behavior. In other words, they are led to believe that the user isn’t financially reliable which is why they are utilizing a large portion of the credit available at their disposal.

4. Carrying Credit Card Balance

A lot of people don’t know exactly how the “minimum payment” feature of credit cards work. They just assume that everything is fine as long as they make these payments.

In theory, minimum payments are a good option. After all, you don’t have to pay any fine and so your credit score shouldn’t be hurt either, right? Wrong!

It’s true that by making minimum payments you can prevent the penalties and/or extra charges. However, you may still suffer in the long run. This is because when you make a minimum payment, your balance amount is carried over to the next month and becomes debt. So, if you continue making minimum payments again and again, your total debt will increase which not only gives rise to financial challenges but also impacts your credit score calculation.

5. Failing to Monitor Credit Report

When people want to increase their credit score, they often to their friends and relatives for guidance. If they are lucky, they get some valuable insight and tips such as expanding the credit variety, timely payments, the option of secured credit cards, etc. However, a lot of times they don’t get to learn about the significance of credit report monitoring.

If your credit report has discrepancies, then the credit rating agencies will continue to give you a poor score even if you are making all kinds of efforts. Plus, you can’t monitor your progress unless you monitor your report and actually measure the impact of your actions.

All the credit rating agencies in India are required to provide every user a free credit report once every year. Thus, there is no reason for you to not get yours.

Building a good credit history isn’t too complicated or difficult. However, having sound knowledge of the same is the key. In that regard, the mistakes explained above can be of great help to you. Good luck!

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How to Plan Your Dream Wedding Without Spending Your Savings?

Life is but a long sequence of good and bad moments. However, some moments are more special and important than the others, one of which is your marriage.

It’s true that you don’t tie the knot every day. Plus, it’s a special occasion because it’s the beginning of a new chapter, or rather a new life. Thus, it’s understandable if you want to organize a lavish and festive wedding, with no concern for the expenses. However, is using your savings for the same a good idea? Let’s find out.

Weddings in India

Indians weddings are known for their grandeur and plush display. However, to make arrangements for these, a massive amount of money is required. This is the reason why many young professionals turn to their savings for help. They liquidate their fixed deposit accounts, bonds, and other long-term investments to fund their weddings. However, this is not recommended by the finance experts for the following reasons:

  • After you get married, many new expenses may need to be taken care of, such as home loan, new furniture, travel, car loan, etc. However, if you have spent all your savings on the wedding, then you won’t be able to clear these expenses.
  • You must always have an emergency fund for financial security. For instance, if for any reason, you lose your job or develop a serious illness, then you should have enough money to handle the situation without needing money from anyone else.

What’s the Solution?

A personal loan is the best solution for funding your dream wedding because of the following factors:

 

Peace of Mind

The biggest and most important reason to get a personal loan is that it gives you the peace of mind when you know your savings safe and untouched. So, you can enjoy planning your wedding without a worry and pay for all expenses easily.

With a personal loan, you also don’t need to go through the inconvenience of selling your mutual funds, bonds, etc. to get the money. Instead, you can give your full attention to the most important event of your life i.e. your marriage.

Fast Disbursal

The approval process for a personal loan isn’t as complicated as a home loan or education loan which require an excellent cibil report and often a loan guarantor too. There are also few formalities and minimum waiting period.

These days, many banks offer special loans which are designed for exclusively for marriages. So, you can also look into them to get the money even more easily and quickly.

Competitive Interest Rates

Thanks to the large number of NBFCs and other financial institutions that have emerged on the surface today, the interest rates and perks offered on the personal loans are extremely competitive. So, if your timing is just right, and your CIBIL report is impressive, then you can easily get an attractive interest rate that will help you repay your loan quickly.

How to get a wedding loan?

To get the best possible loan for your wedding, be sure to do your research and compare the interest rates online. Other than this, you must keep the following things in mind:

  • Wedding Budget: A wedding comprises of various kinds of expenses. However, when you take a loan, then you have to make sure that you have as accurate of a budget as possible. This is to avoid a situation in which your loan is way smaller than your actual expenditure.
  • CIBIL report: One of the most important things you need to do to get a low interest rate is to improve your credit report. This is because all banks decide the interest rate and the terms of the loan on the basis of this important document only.
  • Loan Documents: Make sure that you have the appropriate documents to apply for the loan. These include your ID, proof of income, bank statements, etc.

In Conclusion

Weddings are meant to be thoroughly enjoyed and cherished, there are no two ways to it. However, you can’t let your emotions come in the way of your discretion. So, spend as much money you feel comfortable with, but don’t splurge your savings when a personal loan is a much safer option.

 

Does Credit Score Retires?

Credit rating is a continuous process that begins with the first loan or credit card one takes in their name. Subsequent to that all information related to cards and loans keeps on getting updated in the credit report. The credit score is calculated based on the cumulative information on each loan and card. There are five basic parameters that determine the credit score of an individual. So does credit rating have validity? Does a score retire after a specified time period?

Understanding Credit Scores:

Before we understand whether a credit score retires or not it is important to understand the calculation process for it. Repayment history, credit utilization ratio, loan tenure, credit inquiries and credit mix are the five factors that influence the credit rating.

Repayment records about all loan dues and card dues is reported in the CIR, this is done month on month so as long as a loan is running or a card is active, information on them will keep getting updated. Regardless of the fact whether a loan runs for 15 years or 5 years the record will keep getting updated for that duration. So what happens when the loan is repaid? After that repayment record are not updated but the loan status whether closed or settled is reported in the CIR.

The same applies to the credit utilization ratio too, this information is also continuous as the card would be used on an ongoing basis and this information will also be updated monthly and the score would reflect that too. Hard enquiries (when a prospective lender asks for an applicant’s score) would be reported in the report as and when an enquiry is made. Information about credit mix and loan tenure is also dynamic in nature and would depend on the individual’s treatment and nature of their debt.

So Do Credit Scores Have Validity?

No, credit scores per se do not have any validity and they do not retire. Credit rating calculation is a dynamic process and gets updated as and when there is a change in parameters (that impact the score) whether positive or negative. However the information that is part of the score calculation has a specific validity and will cease to impact the score after a specified time frame. Repayment history for 36 months is included in the report and only repayment records for past 36 month are included in the score calculation. The more recent information has more impact on the rating. Thus if a default or delay is made more than 36 months back its negative impact will not be felt after this time frame.

Hard inquiries for two years are included in the report however when score is calculated only inquiries made in the last year are factored in. So all inquiries made in the past year will have an impact on the rating; older enquiries will have no impact whatsoever on the score calculation. So anyone who wants to improve CIBIL score should avoid making loan applications without a sufficient gap between two loan applications.

Information about “settled” or “written off” loans stays the longest on a report and this account status must be avoided at all costs. Any “settled” or “written off” loan raises red flags for all future lenders as they may feel that you cannot be trusted as a borrower. This information stays on the report for seven years, thus the validity of this information is seven years.

As we discussed before, information related to loan tenure and debt mix is dynamic. If a loan runs for its full tenure then it is considered good for the rating as a deeper credit trail is good for the credit health. Secured loan and unsecured loan mix is also a factor when the rating is calculated, a bigger proportion of unsecured loans is not good for the score. So as and when the loan proportion changes its impact will vary on the score.

Thus credit scores do not retire and have no validity but some information that is used to calculate them may have some validity and may become redundant after a specified time period.

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!

How Will Identity Theft Affect My Credit Score

Sneha, a well-settled entrepreneur, at 31 is well settled in Pune. She owns a house, two cars and few properties. These are solely her properties. She stays with a small family of 3, She, her Husband and a Daughter. She has put in a lot of efforts, in building the empire of her business and the properties she owes. She is a regular checker of her credit score and has made no defaults of any loan she had taken or any loan she has today. She has never made any late payments of any of the credit cards she peruses. Her credit score and credit report, both are in place.

A free CIBIL report is given every year by the bureau as per RBI regulations and she has taken well advantage of it. Now, she is planning for a business expansion. She goes to a bank and applies for a business loan. She is very well aware that a business loan is the unsecured – installment based loan. But with the past records and the payment history she has maintained, she is confident enough that her loan will get approved. While the finalization of the process, her loan was rejected. As she is a very old client, the bank manager explained to her that there is the cibil score goof up, and it has gone tremendously down in last 3 months. With looking in details, they came to a conclusion that it was a case of identity theft.

Let’s understand in detail, that what is identity theft. In this digital ear, everything is available online. There a few people who can hack into your systems and fetch the important and very sensitive and confidential data which then they use to make the theft. So, they will use your name, number, credit cards, aadahar card number and take a credit. Or the may make many multiple online transactions using this. Not only the hackers can do that, but if by mistake you have shared your confidential information somewhere, and it was meant to be destroyd but was not destroyed by any of the reason, some very over smart individual, will steal your identity and make the use of it.

What happens in such cases? When any of this occurs, it becomes an identity theft where the credit transaction is done from your account but not by you. You come to know about it when either you check your credit report in detail by yourself or if you have applied for a credit and it got rejected due to this reason. Let us now see, how can identity theft affect the credit score.

  1. Sudden dip in score

If in the month of May you checked your free cibil score, and it was 783. now just as an example mentioned above, you applied for some loan and it got rejected. Now when you investigate, you came to know that your score is 620. There is the sudden dip of 163 points in your score. While seeing the report minutely, you come to know that there are many transactions which are not made by you and a few credits which you have not applied for! Terror number one.

  1. Rejections in loans or credit cards.

As there is a sudden dip in the score, the credits or the loans you must have applied for, which are in pipeline will get rejected.

  1. Longer run effects

The negative flags, stay on your report for much longer time. Nearly a decade. Now, since you have not made payment by yourself, why would you pay the same? Makes sense, so in those cases, you would need to raise the dispute so that it can get off your report in the meanwhile.

  1. Fear always

Since once this has happened, you will always be scared to share your confidential information even to those whom you would actually have to share in case of taking credits or any important things.

Always make sure while applying for credit cards or any loans, do not share each and every detail with everyone. Also, whenever you share the important documents write the propose of in on the photo copied document in order to not get it stolen. While sending these details, be cautious. If possible send it in encrypted form or try not sending it online. Stay alert and stay accurate & updated. Do not neglect thing which can affect your score!

Is My Income Part Of My Credit Report?

There are a lot of people who do not know what a credit score is and how it is calculated. Many of us only come to know about a credit score after a loan or a financial product gets rejected. After getting such news you try to get your credit report to understand where you went wrong and start making attempts to build up your credit score. While building a score from scratch, you will try finding easy ways to get the score up in no time to avail a financial product. You make all your payments on time, use less limit on your credit card but you do not find a significant impact on your report. Suddenly something clicks in your mind, can my salary be a part of my credit report?

The answer to this question is a NO! Your salary or any type of monetary gains can never be a part of your cibil report. Other than income, factors like, color, race, religion, marital status, gender, occupation, where you live, etc. do not contribute to your credit score.

There are a lot of factors which contribute to your cibil score but salary is not one of them. Factors like your payment history contributes 35% to your score, the amount owed will be 30%; length of credit history contributes 15%, 10% of new credit and 10% on types of credits used.

A credit report is designed to analyze your financial behaviors and if you can default a new line of credit. It makes the lender’s job easy to understand if you are credit worthy and if they can provide you a loan or a financial product. The lender will definitely check your incomes and gains to understand your repayment capability but it will also check your credit report for any past defaults.

One of the reasons why your salary is not listed on the report is because the credit bureaus seek information from lenders, creditors and collection agencies; they do not take any self-provided data from consumers as they may have fake information. The employers also are not comfortable sharing the packages to bureaus as this kind of information is confidential. There can be instances, the competitor company can pull any employee’s records of how much package are you offering and can headhunt your candidate, as credit report information is easily available these days.

How can you bank on your income?   

You can use your income to do a lot of things financially. You can invest in insurances, which is termed to be good investment. The payments you make for your insurance policies are reflected on your report which than helps you improve cibil score.

There are instances, when you need urgent funds and you cannot rely on your family members. You can show your stable income proofs to the bank or any lender for a quick loan which can help you with quick funds. When lenders make decision on giving you a line of credit, your salary is always a key factor while considering your credit worthiness.

Once you have availed a loan, make sure to make timely payments to the bank, so that your credit score up rises from time to time and when the time comes, you avail a bigger loan like a home loan or a luxury car loan with ease.

The other ways to bank on your salary in financial market is to apply for credit cards. Credit cards play an important role in everyone’s life if used properly. A credit card can be a boon at emergency times and can be a source to quick funds. If you have a good income structure, you can apply for a credit card with good upper limit. Card lenders consider your salary and gains when they accept application to determine if you are a car worthy individual and also what would be your credit limit. Owning a credit card can help you many ways including improving your credit score.

If you are on the way to build a good credit score, don’t feel bad if your salary is not considered as a component to calculate your cibil score. You can use other ways to build a good score, where your salary can play an indirect role. Just utilize your salary wisely and make all your payments on time, you will see a great hike on your cibil score in no time.

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!