Credit Score is not important if not looking for credit. Is it true?

Our life revolves around credit. There are loans tailored for every need and want which can happen in your life. Availing a loan can be dicey and hectic when you’re in desperate need of money or loan. The most important component which determines if you are credit worthy is your cibil score. A credit score plays an important role in your loan application. The higher your cibil score is the more your chances is to get your loan at a speedy process. On the other hand, if you happen to have a low cibil score, the chances are you can either get your loan rejected or else still avail a loan with higher interest rates. This looks so easy but it’s defiantly not. The pain of getting your credit rejected because of your low credit score when you desperately are in need to money can cause you serious mental damage. Well, this is only with the loan part.

Have you ever given a thought, if credit score is only important while availing a loan? Is it important in any other way? If you are in the perception that your credit score only matters while applying for a credit or any other credit line, you’re mistaken. A credit report is slowly and gradually becoming an integral part of our life and sooner or later our lives will start revolving around it.

A credit report is a numeric representation of how you’re doing financially and apart from your future lender there will be many other third parties who would be interested knowing your financial status and how you’re doing financially.

Here are the other ways a good credit score can help you,

To get married

Yes, nowadays there are families and relatives who consider checking your credit report to understand whether you are financially worthy or not. A cibil report will give them a clear picture on how many lines of credit you hold and if you are making all your payments on time for the same. This will give them a clear picture if you’re an eligible bachelor who is worthy of getting married.

To land on your dream job

As we all know, when we apply for a job there are different types of background verifications conducted to check your past with your previous employers. Checking your credit report has also become one of the key criteria’s to check if you are job worthy. This type of verification is specially conducted by corporate companies who have large financial account to assign to the candidate. If the candidate is not self independent financially, how can he manage the company’s funds?

To get your dream home

As we all know luxury comes with a price. If you are one with liberal thoughts, you will know by now that renting makes more sense than buying a house. While you are in the process of getting a house on lease and the rent is quite high because it’s in the prime location. The house owner may ask for a cibil report just to verify if you can manage your funds properly and if you can deliver rent to the owner on time.

Like these, you credit score can help you in many ways apart from availing a loan. You can still get a personal loan with no cibil score, but the interest rates are quite high as compared to market standards.

Believe it or not, a credit score plays a very important role when it comes to many things in life. you will have to maintain it for any surprises life might throw at you.

5 queries about your credit score answered!

Credit score is still a relatively new concept in India, though awareness about it is fast growing. Thus it is only natural that there might be a few queries related to it in the minds of most people. One may often wonder what is the need to check their score or can there be a score without loans and so on. So here we discuss five common queries that may arise about credit score.

1. I am regular with my payments; do I still need to check my credit score?

Often people who are regular with their payments feel that there is no need for them to check their score as their score would definitely be good. Despite, payment history being the most important factor in credit rating calculation, other factors like credit utilization, loan mix, loan tenure and credit enquiries also impact the final score. Thus, though you may have been regular in your payments, the score could still be affected negatively because of any of these factors. Sometimes there may be a problem in the report due to inaccurate reporting by a bank or some fault at data entry level. What’s more now you can get a free credit report once a year so do make sure you get your free CIBIL score and stay credit healthy.

2. I do not have any loans; will I still have a credit score?

Loans are one of the sources that help create a credit trail and the other source that helps in creating credit history is credit card usage. Credit cards are more common than loans as more users are likely to have them as compared to loans which are need based. So even if you do not have a loan then your credit card usage can also help you in creating a credit history and get a credit score. It is important for all credit card users to be regular in their payments and keep the utilization ratio in check to maintain a healthy credit score. Those who do not have a credit history get a score of NH or 0 and those who have a credit history of less than six months get a score of NA or -1.

3. Does my spouse’s score impact my score?

This is another common query especially for women when they get married and adopt the husband’s surname. Marriage does not link or impact the score of an individual to their spouse; both partners maintain their individual score and the loans and credit cards in their name only will be included in the score calculation and credit report. If both partners decide to apply for a loan jointly then credit score of both will be considered, though depending on the loan type importance might be given to the score of the primary applicant.

4. Will checking my score impact it?

Whenever one applies for loans whether home loans or personal loans, the prospective lender seeks the credit report of the applicant and based on that they will approve or reject the loan application. When a FI asks for a credit report then it is known as a hard enquiry and it is recorded in the credit report; too many hard enquiries impact the credit rating negatively. However if one checks their own score then it is known as a soft enquiry and it has no impact whatsoever on the credit rating. On the other hand it is recommended that everyone check their credit report from time to time so that they can assess their credit health and also ensure that there are no errors in the report.

5. How long does negative information stay on the credit report?

This will depend on the type of information; repayment history for 36 months is included in the credit report. Thus any default made in that period stays on the report while credit enquiries for last two years are included in the report. Other information like a settled account stays on the report for 7 years. It is important to mention over here that more recent information impacts the score more than older information.

So hopefully this information has helped you in getting a better understanding about credit score, however if you still have a few doubts please do hare them with us.

Smart investment tips to buy a Property

Planning is the key to everything we do in life. If you have a goal in life, be it short term or a long term, a proper plan can help you achieve it. Speaking about plans, we happen to have a lot of dreams which we would like to achieve someday or the other. Dreams like buying a high end car, an expensive phone, shopping for branded clothes, etc. These are dreams which you can fulfill with a small amount of planning and management and there you go! Dreams fulfilled! Is this the case with every purchase in our life?

Here we are talking about buying a home. Buying a house is a very lengthy process and takes a lot of your attention. For many of us, it’s a luxury we cannot afford. In some cases, by the time we reach to a decision to buy a house, the property becomes expensive or else the funds get exhausted. There is something or the other stopping you to make your dream purchase. For buying a property you need a proper plan which includes your budget, place of property, is there a co-borrower you can count on? Home loan options, you need to do a thorough research on which lender would be the best as it’s a long term commitment when it comes to home loans. HDFC Home loan gives you the best interest rates and less processing fees with speedy approvals.

After all the necessary research done by you, you decide on a property and start making the necessary arrangements to purchase the house. The very first thing in the home buying process is to make a huge down payment. You are prepared for it, but at last moment there are some additional charges and without digging a huge hole in your pocket you won’t be able to make the purchase. This leads to dropping the plan and again you are at ground zero.

It’s a total nightmare to see your dream property slipping out of your hands. Now you think you must have started making some smart investment for such a day. Thinking to start making smart investments, we will show you how,

Start early

Buying a house is almost everyone’s dream. Find you calling at the earliest and start saving for a good down payment for the house. On the other hand, if you apply for a loan at the early ages let’s say in your 20s and 30s, the bank will give you maximum loan amount with long tenure up to 30 years. By doing this you may end up paying very less down payment.

Start fixed deposits and recurring deposits

This may look funny, but this helps a lot. We happen to spend a lot on unwanted things and end up having no savings for future. By opening deposit accounts, you can start saving a lot of money. This way, you can minimize your spends and start saving for the deposit account. This savings then helps you make a huge initial payment if needed.

Invest in SIP Mutual funds

This is one more thing you can do to save money to buy a house. SIPs promise you a good return between 10-18% returns depending on which type of fund you are selecting and the tenure associated to it.

Start working on your credit score

The most important thing when it comes to buying a house is that you will need financial aid from a bank or a home loan lender. Make sure to have a good cibil score before you apply for a loan to get the maximum out of a loan buying process.

Every step you take to buy a house gets you one step closer. Just make sure the steps you take will help you in the long run as this is a long term commitment and you need to prepare for the same.

What error  you  can  avoid while  building a credit score

A good credit score can be the ultimate key you can hold to unlock the best financial opportunities in life. Not only a good credit score can help you with various loans and credit cards, it can also help you land on your dream job. It can act like a boost when your future landlord conducts background verification on you. A good credit score can help you in many ways you cannot imagine.

What many of us do not know is that, building a credit score is equally hard as maintain the score. Unfortunately for many people who were starting on this epic credit journey a decade ago had no idea on how to start and how to dodge the blind spots when it comes to credit scores. Fortunately, today you have all the information you need at your finger tips when it comes to starting your journey to build a good cibil score. You have different websites as well, which helps you with free cibil score check to make better credit decisions. With all the information you need, are you still confused? Are you not getting the right gateway to start your credit journey? Are you still on the grey when it comes to identifying the blind spots of credit report?

Today we will help you understand and avoid the most common errors and also tips to build your credit score,

Apply for a credit card

What better way to start your credit journey other than having a credit card in hand. A credit card is one type of unsecured loan which you can use. You will have to make the payment of the credit limit used within 50 days of time. A credit card if managed properly can help you with financial marvels like reward points, add-on cards; you can even apply for another credit card on the basis of your primary one. On the other hand, if you default any payment, you can take a serious hit on the cibil score which will stay on your report for at least seven years.

Apply for a consumer durable loan

If you are denied a credit card because of no credit score, you can apply for a consumer durable loan. A consumer durable loan is the best and easiest way to enter the credit world and it can also help you build your credit. There are a lot of vendors who are entering the consumer durable market as the market has potential. When purchasing a product, you have multiple choices when it comes to lending options.

Avoid getting into debt

Once you open a bank account and start transacting on the same, you are on the financial radar. You will receive a lot of calls from different company’s telesales department who will offer you various loan options. Avoid them and take a loan only if needed. Just because you have an attractive offer in hand, does not mean you will have to take a loan. Many people make such mistakes and end up being in debts. A healthy tip would be to avoid such calls and if needed a loan contact your primary bank branch for loan options. Some banks provide you pre-approved loan options towards your account considering your financial transactions.

Be patient

As we all know, Rome was not build in a day. Similarly you cannot expect your cibil score to go up in a very short span of time. You will have to be patient and gradually see your score go up. Like explained in the earlier point, you can opt for credit cards and other financial options to get your score up eventually.

If you are still not sure on how to start building your credit score, you can always seek professional help. There are companies dedicated for such tasks which can help you build a healthy score for future financial transactions. No process is hard if you know how the process works, be educated about credit facts and start your credit building journey with ease.

How Does Different Credit Bureaus Work

Before jumping to the main topic, Let’s know that what is the credit bureau? And what mainly does it do. A Credit Bureau is an organization who generates and maintains the credit score and credit report of any individual. These both are nothing but a direct reflection of how credit responsible any individual is. There are various factors which these bureaus determine while generating, updating, and maintaining the score and the report. Various algorithms are working on the credits and the repayments of credits any individual has taken and is repaying. It also majorly depend upon the banks or the NBFCs who update them with anyone’s proceedings of the credits. If in case, a bank or an NBFC fails to do so, it directly affects the score.

Everyone who has dealt atleast once with credit score or credit report knows what do they both mean. A score is a three-digit number between the range of 300-900 which is obtained by calculating various factors and report is the detailed information about the accounts. Where are the credit bureaus and how many of them will know the information? In India, there are 4 credit bureaus viz. TransUnion CIBIL, Equifax, Experian and CRIF HighMark. The first ever bureau was TransUnion CIBIL which was established in 2000 with the association of TransUnion, An America based Credit Bureau. CIBIL stands for Credit Information Bureau India Limited. Over the next few years, other bureaus came and established themselves. In 2010, RBI(Reserve Bank of India) passed a mandate that each and every bank or an NBFC(Non-Banking Financial Company) has to update any information regarding the credits which includes any type of credit card or loan of an individual to the credit bureaus.

Credit score consists of 5 parameters.

• Payment History

• Amount owed

• Length of credit history

• Credit Mix

• New Credit

Check the following table which determines the weightage of each of the above-mentioned parameters in respective credit bureau.

TransUnion CIBIL

Equifax

Experian

CRIF HighMark

In Percentage(%)

Payment History

35

35

35

35

Amount Owed

30

30

30

30

Length of Credit History

15

15

10

10

Credit Mix

10

(Inquiry) 10

15

(Utilisation)15

New Credit

10

(Accounts in Use) 10

10

10

Now, as per the details mentioned above, the 65 percent of any credit score comprises of the payment history as in how responsible the person has been over past years in making the payments of the credits s/he had been taking is considered. The amount owed is how much is the total credit anyone has taken, this includes the credit card limit as well as a loan. And the rest three factors revolve around the total length of credit history i.e. from how long has an individual be taking credits, credit mix i.e. what kind of credits one has. Secured or unsecured and revolving based on fixed credits. New credits are the new type of accounts (not be mistaken by bank accounts) or the credits which one opens. In here, Equifax has a different name as Credit inquiry which is the number of times one has inquired about any kind of loan or a credit card. The loan would be any of the loans like, home loan, education loan, car loan which are basically unsecured types of loan. And the accounts that are in use. Also, CRIF HighMark considers the credit utilization instead of credit mix.

There is no much difference between any of the factors which determine the score. There is hardly 5 percent change. So when the credit score is calculated is more over the same with just 20-25 points change. There can a major difference when a bank would not update any of the bureaus about a transaction. That can happen sometimes, that a particular bank would update the information to 3 bureaus and skips one or there is no tie up with any of the individual bureaus. When anyone checks the detailed report, it can found about which information is missing. Majorly if there is any change, it would be of 50 points maximum and shouldn’t we worry about, as taking the above points into consideration.

But, one should always be responsible for his/her credits and should not take them casually. The weightage may differ in any of the bureaus of the parameter but, an individual’s behavior would make the creditworthiness better or worse. So, one has to be mature enough in taking the credit repayments seriously!

Learn How to Read Critical Information from your Credit Report

All credit bureaus in India are required to provide a free credit report once a year to anyone who asks for it. This means that you can access your credit report free of cost four times a year since there are four credit rating agencies in India. However for these reports to be useful you should be able to understand the relevance of the information contained in them, especially the critical part. So here we take a look at the critical information that a credit report contains what it means and why you need to focus on it.

What is Critical in Your Report?

So let’s say you got your free credit report, now you need to know what is contained in each section and how it impacts your credit score. As we all know credit scores are all about your debt history so all information about all your credit cards and loans.

The credit score definitely is the most important thing in your CIR. A good score is important for you to get loan applications sanctioned and is also an indicator of your credit health. A score above 700 is considered to be good.

The accounts section is the most crucial part of the report and the information contained here impacts the score to a great extent. Information about all open loans, closed loans and credit cards is included in this section. Thus you should first make sure that all the loans and cards that are mentioned in the CIR actually belong to you. Though unlikely some loan or credit card that may not belong to you may be mentioned in your CIR. It could be just an error or sometimes a case of identity theft in either case it is very important that you take immediate action on it.

The next thing you need to understand is the account classification of each loan. Each debt is classified as per their payment status. Thus if you have been paying regularly then your loan would be classified as STD. If a loan is classified as anything other than STD then it means that you have not been paying regularly and it is not good for the score. So make sure that no loan is classified as a non-std asset by mistake. It may happen that the borrower may assume that his EMI’s are being debited on times while it may not be happening due to some error or oversight.

You should also check your repayment history, this will let you know if you have paid all your dues on time in the past 36 months. DPD means day past due; thus DPD of zero for all credit cards and loans is a good sign for the credit score. Anything beyond zero DPD signifies that the payment has been delayed which will lower your credit rating.

Also ensure that all loans that have been repaid by you fully are reported as closed. Even if you have repaid all the dues from your end but the loan reflects as an open loan then you need to get in touch with the lender and get a NOC or complete any other pending formality as required.

When going through the CIR also check details like the total loan amount, unpaid amount, tenure, interest etc. This will ensure that you have all your facts straight and there are no errors on the part of the lender or you have not missed any important detail.

Other Aspects That Require Attention Too:

While what is mentioned above is critical in your report, there are other aspects too that require careful consideration. Some facts that you need to check are:

  • Personal Information section contains details about the DOB, PAN, and driving license and so on. Make sure that all information mentioned is accurate

  • Contact Information section has details about individual’s current address and also past addresses (if any), email address, telephone number, mobile number etc. Again the accuracy of this information is important.

  • Employment Information section has details about the current occupation, work place details, name of the company (for salaried) duration of employment etc.

  • Enquiry Information sections details about all enquiries made by lenders and this also has a bearing on your credit score. So do make sure that the details mentioned here are accurate.

So get your CIR and understand what it means, it will help you stay credit healthy.

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.

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.

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.