Let’s find out interesting facts about credit score that you didn’t know

Credit score itself is an interesting topic. The whole logic, algorithm, how is it calculated, what factors are associated with it. All becomes one big score that is required to check the creditworthiness of an individual when he or she has applied for a loan or credit card to either the banks or the NBFCs (Non-banking Financial Institutions). For the basics, A Credit Score is a three digit number ranging between 300-900. Where 300 is the lowest and 900 is the highest. The score between 750-900 is a good score. Between 600-750 is considered as an average score and anything below 600 is bad.

There are four credit bureaus in India who gives credit scores. CIBIL (Credit Information Bureau India Limited), Experian, Equifax and CRIF Highmark are these four bureaus. These credit bureaus have the authority to access an individual’s credit history as they have the communication channel set with the banks and NBFCs (Non Banking Financial Institutions) who passes the information of when was the loan or a credit was applied to when it was approved to when it was disbursed and finally when they do they start repaying. Any missed or delayed payments, are all recorded and obviously which affect the score!

Payment History, Amount Owed, Credit Mix, Length Of Credit History and New Accounts are the five factors of which the credit score is made! We all know that. We have read many times about these criteria or the parameters and how they can make or break the score. The free CIBIL Score that is offered also helps anyone know the score and a detailed report wherein one can check the mishaps that must have happened if the score has gone low or anything related. But let’s know a few things beyond that. And what are other factors that one can take care too!

The first that comes is the credit utilization ratio:

What is the credit utilization ratio?

If you are a credit card user, you would know that there is a credit limit to the card which is assigned to you. Now, the credit limit given does not necessarily mean that use the whole of it. Practice shows that people who used a maximum 35% to 40% of their credit limit of the credit card, helped them keeping the score batter and on an average increasing the score. The logic is that it shows that the user is not credited hungry and is responsible enough to use some amount of the credit available. In such a case, if your utilization is high, try and get one more card and manage the balance or you can always clear the outstanding and revive the credit limit.

Secured Loans:

Secured loans or secured credits gives the financial institutes an idea that there always is a backup just in case if there is an emergency and you may just not be able to pay off the loan. A Car loan, Gold loan are some such small amount example of loans and secured credit card which is obtained against the FD that is kept to get that credit card are some of few hacks and tricks you can follow to get a better score.

Investing in something and from the interest received, pay the EMIs:

Now, this is one very interesting concept. Say you have X amount of money with you. If you are buying a home or a car or want to go for higher education or maybe send your kids for the education if you are that age, keep that amount as an investment. Take a loan for the work and manage in such a way that from the interest received from that investments, you can pay the EMI of a loan. In such manner, you can have the money safe, invested and with a new loan account, all the factors of the credit score are also covered helping you increase the score!

Follow these simple interesting hacks related to credit score which you probably didn’t know!

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Denied credit based on credit report? Here’s why

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Did you ever try to opt for a loan or a credit card and have been denied? Your credit history is recorded and filed as cibil report with credit bureaus. When you apply for a loan or a credit card the bank is likely to request for a credit record by the credit bureaus to understand if you have any default payments or unpaid debts. It also indicates whether you have filed for bankruptcy or arrested by to loan defaults. The reasons for denial of credit can be varied and different in every situation.

Here are some reasons why your credit can be denied:

High Debts

Any lender or creditor would like to see how you spend your earnings, if you have high debts or used maximum limit of your credit card could be a reason why your application can get rejected. Always try not to overspend from your credit card, many banks and organizations prefer people with people at least having 50% of limit available in their credit cards.

No credit history

A no credit history means you don’t have anything on your cibil report. This means you have never applied for any credit in your lifetime, which is a good thing. Many individuals prefer buying things in cash or without any line of credit which leads to a no credit history. In such cases many banks face hard time to sanction loans or credit cards without knowing the individual’s pattern of repayments. You can show your rent receipts if you are a tenant just to prove your reliability in making payments.

No credit activity 

When you have active accounts with banks it’s important to make small transactions with those accounts. If you have not made any transactions with such accounts it’s hard for a score to get generated. It’s suggested to make small payments or transactions to keep the scores activated and going.

Frequent credit report inquiries

If you have too many inquiries on your credit report and not many loans reflected on your report, the lender will come to a conclusion that you are trying for loans with multiple banks and organizations and there is something wrong with your current financial status.

 

Fraud cases

If you have done a fraud in terms of repayment, bad debts or you have been approached by an agency for money collection. This will severely damage your cibil report and will lead to a low cibil score. Always pay your debts on time and adhere to the EMIs so that you don’t face such circumstances. The collection agency approaches a customer if the credit balance has not been paid and its more than 6 months for the same.

If your application for a loan or a credit card is rejected, you may ask for the reasons why your application was rejected. If the information provided to you is inaccurate or false, you can file a dispute and the credit bureau has to correct the errors found.

It feels when you face such situations where you are denied for credit on the basis of a bad credit report but do not lose hopes, there is always a plan B. you will be able to find a lot of private lenders who will not consider you cibil rating. Start building your credit ratings from scratch and try maintaining a good score so that when time comes you can get easy access to loans. As we were told “small steps will lead to a bigger and better you”.

How to Manage Credit Card E-Statements Effectively

We do a lot of things electronically today, let it be shopping or booking a room in a hotel. Banking is no different. Online banking is trending, and banks too are encouraging the same. If you are a credit card user then it is likely that your bank has pushed you to switch to electronic statements (or e-statements)  rather than paper versions at one point or the other. However, should you go for it? Keep reading to find out.

Importance of Statements

Bank statements hold a lot of importance- they serve as a record of payments, charges and fees, and even errors, if they have occurred so. They are also almost essential when it comes to making tax returns, applying for mortgage, etc.

E-Statements Vs Paper Statements

There is a reason why banks tend to promote e-statements- they are convenient, and make less clutter. Also, as digitization is on the rise, more people are willing to opt for e-statements rather than paper statements. Some banks also charge a small fee for paper payments, which is another reason why people like to get e-payments instead.

Although e-statements are easier to manage and organize, paper statements have their advantages. They are permanent, and can be accesses and used easily. Many people don’t give e-statements due importance, and often ignore them, which is another reason why paper statements can be useful.

Managing Credit Card E-Statements

If you are sticking with paper statements then it is a different story, but if you have decided to go for e-statements, then you can use the following tips to manage them better:

  1. Opening and Saving Your Statement Every Month- Whenever you get the notification for your monthly e-statement through your e-mail or sms, make it a point to log in your account and download in ASAP. Don’t just take a look at it and forget about it, but keep it in a separate folder along with other e-statements. This way whenever you need to check the records you know where to go.
  2. Keeping Contact Information up to Date- If you decide to change your primary email address or phone number, make sure you inform you bank about it. This way they can deliver messages about your e-statements on your new phone number or email address. It is also important that you check your credit report e-statement frequently, so that if there is any discrepancy you can get it corrected by contacting your bank.
  3. Computer Security- Just like security is important with paper statements, it is important for e-statements too. Thus, make sure your computer is secure and protected for malware and other forms of cyber attacks. Install a good anti-virus program and keep it updated. Also, never share your e-statements online through email or any other medium.
  4. Keeping a Record- While collecting and storing your e-statements can be handy, it is important that you keep a separate record too. Make a spreadsheet with all your accounts in one column, and the months on the top. Enter the amount you pay each month in the columns under the months. This spreadsheet can be really useful when you want to track your payments.
  5. Don’t Just Rely on E-Statements- Monitoring your credit card account can prevent potential theft or other kind of frauds. Thus, you must never just rely on your e-statements for keeping an eye on your account. Instead, log in your account on a regular basis, and do a brief check. Also check your credit score from time to time, to ensure that you are not losing points. For this you should be obtaining your CIBIL report at a regular interval. Poor CIBIL score can make obtaining a loan a nightmare.

Unless you have some concrete reason to opt for paper statements, there is no harm in choosing e-statements. In a world that is increasingly becoming paperless, e-statements will soon become a norm, and it is a possibility that paper will be out of the picture altogether. Thus, the sooner you make the switch, the better. Make sure you follow the tips given above on managing e-statements, and you won’t have to worry about a thing.