Mistakes to be avoided when trying to improve CIBIL score

A credit score is something that reflects your credit history and thus it is something that cannot be built or destroyed in haste. A lot of factors contribute in making or breaking your credit rating. Being a responsible borrower is the simplest way to having a good cibil score; but if you have not done that then you will have to work on trying to get a better score. While there are certain things that can help you build your score, there are some other aspects that can pull it down. So here is a look at few things to avoid if you are looking at improving your score.

  • Excessive Use of Credit Card: Credit cards are a great convenience but their use may often be criticized as one can easily go overboard and regret it later. However one may think that if they manage to pay their full dues on time the credit card usage will never cause a problem, but this notion is wrong. Using your card judiciously is important if you are looking at improving your score. This means that you need to limit your credit card expenditure per cycle to 40% or less of the sanctioned cared limit. This is known as credit utilization ratio and this needs to be calculated per card wise as well as for all cards put together in case of multiple cards. High credit utilization can harm the score as the user appears to be credit hungry.
  • Making too Many Inquiries: When you apply for a loan, the lender seeks your CIR from the credit agency which is known as a hard inquiry. Each hard inquiry is recorded in the CIR and impacts the score negatively. Thus if you truly require a loan then make sure you research well before you actually apply for a loan. This will ensure that your loan application is not rejected which will eliminate the need to apply for a loan elsewhere. So for example if you want to buy a new car and need a loan for it, then carefully research about car loans Check which lender offers loans at what rates, what is the LTV ratio, what are the documents required, at what credit score they are willing to offer loans and so on. You should then approach a lender who you know meets your requirements and who will be willing to lend to you based on your rating and profile. Refrain from making unnecessary enquiries.
  • Settling an Account: Consider an example to understand this aspect. Priya is looking at improving her credit score so that she can apply for a home loan next year. She goes through her CIR and spots an old credit card debt; she decides to take care with an aim of improving her score. She got in touch with the credit card company and she paid the dues after some negotiation. Hoping to see her score improve she got her CIR but was dismayed that it had reduced further. If you are as confused as Priya that why did this happen then we have an explanation. When you pay old dues then the fate of your score depends on how this repayment is reported. If the account is reported as settled then it could mean trouble as it will raise a question mark in the minds of all future lenders about getting their money back in full. If the debt is reported as simply being paid then it will have an opposite impact.  
  • Guaranteeing a loan without thinking: Sometimes an applicant may find it difficult to get a loan on his/her own due to lack of proper documents, low score, not meeting the eligibility criteria and so on. In such a scenario they may ask someone to guarantee their loan. Well this can definitely ease out the problems for the person seeking the loan but may cause the guarantor to land in a tricky position without realizing so. If the applicant fails to pay his/her dues on time then the guarantor may be asked to do soon. What’s more each delayed payment can harm the score of the guarantor as well. So though you may be servicing all your loans on time you score may still be low because of a loan you guaranteed. Thus if you plan to guarantee a loan, do it after being sure about the applicant, you own ability to service it in case the applicant fails to so and also after you are sure about its impact on your own credit score.

Often small things can cause your score to dip. Thus make sure you steer clear from the above mistakes if you want to be credit healthy.

 

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.

 

 

How to get eligible for the highest credit card limit available?

The highest card limit is not a fixed number. It is relative, and differs from one person to the other. Before you ask for the highest credit card limit to be made available to you, it is important for you to know the exact reason for the request. Let’s check a few of the reasons and then see a few simple ways to become eligible for a higher credit limit for the right reasons.

 

What is the number one reason for you to ask for an increase in spending limit? Are you in the habit of maxing out card often? If that is the reason, you’ll be disappointed to know that credit card companies may not entertain your request. The card that has been issued to you is basis a few factors. The issuing company, even those that offer you instant approval credit cards, may have got cognizance of your shopping trends and / or association with clubs, or they have direct sources of information by way of your salary slips. In addition, if you have credit history already, they will have accessed your CIBIL rating online and downloaded your credit history. So, the initial limit on your credit card is a combination of these assessments. Also, it is essential to understand that your available spending limit is a compound of your income level, after taking into account your current debt obligations and expenses. So, if you trying to become eligible for a higher credit limit, have a sound reason, like earning more reward points on your card that will lower the cost of your frequent need for air travel (a genuine reason), or improving your credit utilization ratio, which accounts for nearly 30% of your CIBIL score.

 

The best way to become eligible is to not ask for the raise, but build credibility, as a financially responsible person. Make your payments on time and keep your credit utilization below 30%. If you sound desperate to have your spending limit increased and the card issuer affirms that you are still not eligible, this can impact your credit score negatively, causing a dip. Even if you ask for an increase, don’t bite off more than you can chew. A 10 – 15% increase is still viable, but doubling the limit is well-nigh impossible.

 

More often than not, your spending limit is revised on a periodical basis. If you are accessing more credit on your card and have managed to stay way out of the loan defaulter list, you will be rewarded with an automatic increase in 6 – 18 months of getting the card. However, if your limit is on the higher side, the chances for dramatic increase are, perhaps, limited. In the meantime if your salary has increased or number of income streams has increased, notify your card issuer. They may revise your limit based on the new income reports.

 

The best way to qualify for an increase is also to use your card frequently and showing financial discipline in paying back on time. This is an indicator to the card issuer that not only do you need access to more credit, but you are capable of managing your finances without a problem.  Make sure to pay off within your billing cycle. When your card issuer observes this pattern over a period of time, your automatic increase will be substantially higher.

 

There is yet another way to become eligible for a higher spending limit. It is unorthodox and may affect your CIBIL rating temporarily, but if the objective is to ultimately improve the credit utilization of your credit card accounts, then this may work. If you have two credit cards from the same company, you may want to transfer the limit from one card to the other. This increases your limit and allows you to spend a bit more. However, ensure not to go overboard. Keep the utilization to below 30% to maintain a good CIBIL score.

A good credit score is paramount to staying on the good books in the financial world. It opens a world of opportunities for more credit and loans. However, it takes some financial discipline to be on the high side of 700. Half your battle for more credit is won if you have a good score.

Is a Higher Credit limit good for your CIBIL score?

Thinking about increasing your credit limit? Worried about how it will impact your CIBIL score? In this article we will cover just that! A credit limit is the maximum amount that a lender permits you to borrow on a credit card. Financial institutions take a number of factors into consideration when they set your limit. They will first look at your credit score, which is a numeric summary of your entire credit history. Looking at your CIBIL rating gives them a better idea of your repayment pattern and your ability to repay future credit. Credit card companies will also look at the outstanding credit made available to you through other credit cards. Getting a higher limit on your card does not automatically mean that you should be splurging beyond your means. Rather, you should be wise in handling credit which in turn will benefit you in a number of ways.

A credit score can be positively impacted when more credit is made available. One of the factors that contribute to your CIBIL rating is the credit utilization rate. The ratio of one’s credit card balance to the credit limit is termed as credit utilization. It shows how much credit a person is using. The lower the credit utilization ratio, the better will be your credit score. Likewise your CIBIL rating will be negatively affected when your credit utilization is high. If you decide to avail a higher credit limit and use all of it then your credit utilization will shoot up and tarnish your credit score. However, if you do not touch the newly availed credit then chances are that your CIBIL rating may improve. You could consider asking for a credit limit increase when your income has increased, when you hold a good credit score and when you do not have much debt. It is important to note that financial institutions can revise your limit from time to time according to your CIBIL rating, transactions etc.

One of the other benefits of having an increased credit limit is that you wouldn’t need to hold multiple cards from different credit card companies with lower limits. You would just need to keep track of a single card and use it as per your requirements. Another advantage of having a higher limit is that it can serve as an emergency cushion, provided that you are disciplined in handling finances. You can use it to pay for necessary car repairs, booking last minute tickets etc. The higher your limit, the more you will have at your disposal in case of emergencies. Additionally, higher credit limits make you more appealing to the credit card companies. Financial institutions offer added benefits to their premium cardholders. Keep in mind that credit card companies and other financial institutions want to see you maintain a high CIBIL rating and follow through your financial obligations.

There are downsides to have an increased limit on your card. This happens when you fail to strictly monitor your spending, which then hurts credit score. Often times when availing a higher credit limit, people start to believe that their CIBIL rating has gone up more than it actually has. This increases the chance that they will apply for new credit which again means more credit inquiries will be made on their credit report. Ultimately it leads to a drop in CIBIL rating rather than an increase. You can also run into the risk of increased debt and higher interest payment. Chances are that you may not be able to pay your bill in full when you have an increased credit limit. That again means you would have to pay more in interests to the credit card companies. Another drawback is that you can end up depending too heavily on credit cards.

Yes, a higher limit means that you have more credit at your disposal. Increasing your credit limit can be a good thing if you are financially disciplined. It can serve as your asset. On the other hand, if you are reckless then you can quickly fall into a debt trap. When credit card companies are letting you avail higher limits, make sure that you get every detail from them. Know the plus and minus points of handling a card. Be responsible with the way you treat credit limit increase. It can easily tarnish your credit score which will take time to build up.