How to Keep Track of Your Credit Score Easily

Your credit score is a benchmark number for your credit worthiness. The banks and financial institutions always request your CIBIL score details before accepting a loan or credit card application. If you have a good score between 750 to 900 points you are considered as a less risky prospect for granting a loan. Thus it is very important to maintain a good credit history and score.

In order to keep track of your credit score the easiest step is the first step. All you need to do is keep a track of your credit report. For this, simply check CIBIL score online for free time or make a quarterly schedule for the same. If you fail to study your CIR regularly, chances are you could be affecting your score unknowingly. Sometimes a missed-report by bank is enough to bleed the score. So keeping a track of the report ensures that you keep a track of all of your credit activities.

With credit report in hand you would know how many loans and credit cards you owe. You can easily calculate your income to loan ratio. Your credit percentage should always be 45 % or below the income level. If EMIs for credit card expenses and loans other than home loan total more than 25 % of your income you should consider it inappropriate. As long as you could maintain a manageable income to loan percentage you are less likely to fall into debt trap and miss the payment.

To maintain a decent score, it is mandatory to have a clear credit history wherein there is no lapse in repayment. Thus timely payment of loans and bills is one of the most important steps to add to your credit score.

Some tips to ensure timely repayment of balances-

  • You can try to put all your bills details handy in one place so that you don’t miss any of them ever. Use a computer excel sheet or maintain a journal for the purpose.
  • You can also consider to make a habit of paying out on a same day each month. This avoids least management of bill payments.
  • Always carefully note down the last due date for payment. It is a good habit to make payment well in advance rather than enjoying the last day ride.
  • Use an automatic payment via your bank account. This ensures regular payments. However you would need to make sure your account holds enough funds always. Check bounce can have a very negative impact on your score, so beware of this fact always!

When you study your report, be vary of any mistake in personal information or account information. Re check if all the credit related information is true. If there is an error, you should raise a dispute with the bank at the earliest. Also, never ignore an unidentified query or action on CIR.

Other than your repayment habits, your card plays a major role in maintaining a good score. As it is easy and convenient to use a plastic card for your day to day expenses, it is easier to increase CIBIL score with that card, provided you keep clearing the card balance before the due date every month. Unpaid credit bills and large card balances can heavily damage the score.

 

When you keep a good care of your credit score, you can be future safe for credit. Another way to increase the score is to keep your old credit card account with good history with you. Never close this card. Old card would not only grant a positive and longer credit history but would also emphasize on unrestricted repayment history. These two factors make you a desirable prospect for credit.

 

However you should not use your card for all expenses. For, your credit utilization would be very high in that case. You should instead use up to 30 per cent or lesser credit limit provided to you. This helps you maintain a healthy CIBIL score. Sometimes bank might offer you better credit limit on account of your good credit rating. Accept the increased limit as it will improve the credit utilization further and help your score. The increased limit should never be a means to increase the expenses.

 

Last but not the least, you should also pay attention to the accounts of the co-signors, joint account holders, or for the ones’ you signed as guarantor to. If any of these parties fail to repay they would directly damage your report as well.

All in all it is easy to manage the score if you follow these tips.

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No credit score? Should you be worried?

Not having a credit score can be a bit of a Catch 22 situation, as having a credit score will help you qualify for credit, but at the same time for someone with no credit to begin with, how does an individual get a score? This is especially difficult for a first-time applicant for a loan or credit card as the lender needs to establish their creditworthiness. What thenl is the solution? Where should an individual start?

Globally, credit information companies or bureaus are trying to break this hold to establish credit scores by using alternate information such as rent payment details and information from public records to help establish credit history. As on date in India, we do not have a similar practice, and having a credit history is the only way to pull up credit scores.

Why is a credit score important?

A credit score is a numeric representation of your creditworthiness and is the first piece of information a lender will view when you apply for a fresh line of credit, be it a bank or any other financial institution. The score helps them determine whether you are likely to default on a loan, or whether the loan will go ‘bad’. Typically ranging between 300 and 900, a healthy or good score can help you obtain a loan when you really require one. Often, it can be the differentiator between an application being approved or rejected. While a loan for low credit score is not impossible to get, it could mean a compromise in the loan terms and conditions, especially with regards to the rate of interest being offered. A good score is most likely to result in the most competitive rates.

Help! I don’t have a credit score! What do I do?

Even if you don’t have a credit score to begin with as of now, do not worry. Let’s take a look at the options open to you, in order to start building your credit score.

Secured credit card – This is a sound way to get started on building your credit history, and banks are willing to offer this product to their existing customers. The card is linked to a fixed deposit that you maintain with the bank, and if need be, dues are recovered by liquidating the deposit. Of course, if you are looking to establish credit history, make sure that all payments go out on time, with no delay and ideally in full. When done over a period of time, it indicates healthy credit behaviour, that the person is able to handle credit responsibly. This will help your score, and over time even increase credit score.

Become an authorised user – If you are finding it difficult to avail of a card in your name, consider becoming an authorised user jointly with someone (typically immediate family) who already has a credit card. The repayment behaviour will help you put together your own score, as the primary cardholder’s good payment history will appear on your credit report. If you do choose this option, make sure you monitor your credit report at regular intervals to ensure correct reporting is taking place.

Make small purchases – If you’ve held a card in the past and did in fact have an established credit line, you can look at ‘reviving’ it by making a small purchase on the card, which will immediately pull you back into getting a credit score. Remember, credit bureaus use algorithms to develop a score, and one of the requirements is a usage pattern which will come in only once you use a card. Hence to start off the process, make a purchase, but also make sure that you pay off the dues as soon as the card statement comes in. This information once reported to the bureaus will help you begin establishing a credit history.

In conclusion

Once you have credit, be judicious in its usage. Timely payments go a long way in making sure that your history remains good, as does the length of accounts you have open. Hence retain good ‘old’ debt if possible, as keeping an account that is for example a decade old will boost your credit score. To make sure that you do not fall into a debt trap – and this is very important for first-time users – do not sign up for more cards than you can manage. Further, do not spend more than you can comfortably repay, in order to set up what you had intended in the first place – a good, strong credit history that over time will work for you.

Once you have started building a credit score do keep in mind that it requires financial discipline in order to maintain a score and subsequently even boost it. Over a period of time it can be done, and in the long run will prove essential to help you stay financially fit.

 

Ways you can improve your CIBIL score fast

My name is Sonali Kulkarni. About three years ago, I settled a loan for 4 lakhs that I took from a NBFC. That settlement still shows on my credit report. It is affecting my credit applications. What can I do to have it removed from my report?

What Sonali has faced, you might be facing too. What she didn’t know is that such “settlements” reflect in the credit report for at least 7 years from the date of last reporting. Yes, as shocking as it may be having unhealthy credit practices or having been reckless with regards to your finances, can affect you miserably for a long time. Our most sincere advice to Sonali was to adopt healthy and responsible credit practices.

Theoretically, a lot people will suggest you to “observe credit discipline” and adopt “healthy credit practices”. We shall answer in this article what it really means to be credit disciplined and how you can be counted as a “responsible credit user”.

There are a number of ways on how to boost your credit score, however, there are some practical habits that you can start implementing from this moment onwards. Below are some very realistic tips that will help you to improve CIBIL score and also by practising these on a regular basis you will be able to maintain authority on your finances.

  1. Avoid cheque bounce: Some things are beyond our control. But things like issuing cheques and allowing them to bounce due to “insufficient funds” is very much within our control. A cheque bounce will not only attract bank charges, further reducing your balance but also adversely impact your score. Issue cheques for amount that you have or else ask to give post dated cheques (PDCs) for dates when you will have funds to honour your payments.

 

It is most advisable that you streamline your finances. Try to manage funds as judiciously as you can, avoid making hasty impetuous decisions regarding your money and most importantly exercise self control over your expenses.

 

  1. Standing Instructions (SI): You may have been late inadvertently in sending payments on your loan instalments or credit card dues. It’s time for taking some corrective action. Do this for future. Find out your billing cycle and your due dates. Set a standing instruction for an auto debit on your salary account or your savings account, where you are sure funds would be available to make the requisite payment. By doing so the lender will automatically debit your account on the set due date and this way you will not be hassled with remembering all the payment cycles. But make sure the account on which you have set the SI should not be out of funds before the due date orelse you will again become a defaulter on loan.

 

You can set SIs for your electricity bills, phone bills, etc too. This habit will keep you free of any anxiety over bill payments.

 

  1. Stop applying for credit from various lenders: You are already in the red zone because you have been unable to service your obligations properly. Yet you go ahead to ask for futher loans? No. This is not a good habit. Firstly, since you are already struggling with a low rank of credit rating, CIBIL member banks and NBFCs will not be willing to sanction any further credit to you. Bankers will be cautious of you as you are bound to exceed your debt servicing capacity and due to overload of credit you may not be able to honour any repayments.

 

Secondly, even if you do have loans from several banks you are bound to mismanage them and forget to make timely payments. A responsible credit user will consolidate his debt to not more than two loans. That means, pay off all other petty debts using money from one loan and then service that single loan on time.

 

Thirdly, it does display that you have an insatiable hunger for credit. Banks and lenders are unwilling to party with such individuals. Credit discipline demands that you do not display such inappropriate behaviour.

 

  1. Prefer Secured Loans over Unsecured Loans: If you must go for some form of credit then prefer to go for secured loans like home loan, loan against your FDs, loan against gold or property or equity holdings. Avoid asking for unsecured loans like personal loans, even if they are easy to get. You may want to apply for a secured credit card vis-à-vis a normal credit card. This is so because, unsecured loans attract a higher rate of interest and that would mean a higher payout of EMI every month. Higher the percentage of unsecured loans, greater will be your responsibility to service it.

 

  1. Avoid using too much of your credit limits: Going overboard with credit will indirectly impact your CIBIL report With an overused credit card, every month there will be increasing outstanding balance to pay off. Unless you habitually pay it off in full, which ideally a responsible credit user will, your outstanding balance will just keep building up. This will mean increased credit burden and might put you in a situation where you may not be able to pay it.

Don’t be desperate for credit. Rein in your urges and be more patient. This will yield positive long term benefits and may you never have to worry about credit woes again.

Don’t undermine your old credit card for a good CIBIL score

Building a good CIBIL score requires diligence and patience and is not something that can be achieved overnight. Even if you are promised quick-fix methods to build your score, beware – they are the ones most likely to backfire. Over time however, you can work towards improving your credit score, by focusing on your credit history.

Credit cards are one such product that if used judiciously, can help you not only build but also enhance credit score over a period of time.

What is a CIBIL score?

It is a credit score generated by CIBIL, India’s oldest credit bureau. Owing to the first mover advantage, credit scores are very often referred to as CIBIL scores colloquially.

The first step

Your immediate plan of action should include requesting for a copy of your credit report, so that you know where you stand, and where you want to be. Check the report for errors and if you do spot any, have them rectified by contacting the concerned credit bureau. Keep a keen eye out for any payment-related inaccuracies such as delayed or skipped payments.

How will your old credit card help?

If you have been using a credit card for a fairly long period of time, don’t discontinue the card. Making timely payments on cards can generally help improve your score, as it shows a lender that you are able to use credit responsibly. Of course, this only works when you have no delayed or skipped payments, so be very careful as to how you utilise your credit cards. Someone with no credit card usage on their records at all is more likely to be perceived as a higher risk as compared to someone with responsible usage patterns.

Further, you need to use the card to continuously increase credit score, but make sure you don’t max the credit limit on your card. A good rule of thumb is to stay well within the amount assigned to you, the ideal being up to 30% of usage. Consider this: use as much as you can comfortably repay when the bill comes in. If you find it tricky to keep tabs, use your credit card as a debit card – remember that the money in your savings account will go towards card bill payment. In the meantime, rack up reward points on your card that you can then redeem at a later date. This will help boost your credit score, and at the same time you would have stayed well within your means. Credit cards are ultimately not free – while they do offer you the convenience and ease of use, never forget that the dues have to be paid, as it is nothing but a loan.

Also, it is likely that an older credit card has over time been assigned increased credit limits. If you abruptly close your card, the credit utilisation ratio on your remaining cards will go up, with the now reduced combined limit across cards. This can drastically affect your score, as it works as a red flag to lenders. If you really do need to close out an account, consider closing a newer one or maybe one with annual fees instead. You could also try to curb your spending, but retain the old card instead.

The length of credit history is an important parameter when it comes to credit reports. Hence, a card with some vintage, or a ‘good’ old card can go a long way in boosting your score. The older your accounts, the more responsible you seem to a lender and you are rewarded accordingly.

The bottom line

Ultimately, the decision of whether to continue with an old card account or not is entirely your decision. But do keep in mind that undermining such card accounts can be more damaging, and it might just be worth your while to keep them live.

 

What is a CIBIL score and how to get it for free?

A Credit Information Report (CIR) offers an individual a numeric summary of their credit history. It plays a major role should an individual want to apply for a loan, or a credit card, as all banks and financial institutions run a CIR as part of their loan approval process. It helps lenders to evaluate the potential financial risk prior to sanctioning funds to an individual, and thereby mitigating losses. Not only does a CIR help the financial institution manage their business, but it also helps the individual secure a loan or credit card sooner.

What is a CIBIL score?

A credit score constitutes a part of the CIR. Basis the financial information provided by lenders to Credit Information Companies (CIC), or Credit Bureaus, a score is determined. This score, typically based on a scale of between 300 and 900 points, is what is taken into account by a lender prior to offering credit. With CIBIL for example, a score of 750+ points is considered to be good. For a first time borrower with no previous credit history, a score of -1 is displayed. Different CICs, however, may have different scoring parameters.

While calculating the score, a number of parameters are taken into consideration, including information such as the number and type of previous loan accounts (for example, housing loan, auto loan, credit cards), repayment track record, outstanding debt and the duration of the individual’s credit history.

At times, demographic data such as the individual’s place of residence etc. are factored into the credit score. This is a practice followed by some of the newer credit bureaus, when assigning a score to an individual with no previous credit history.

What is the importance of a CIBIL score?

The credit score indicates creditworthiness of an individual. At the time of applying for credit, a good score helps in availing of a loan or a credit card quicker. It may also determine the rate at which the borrower may choose to lend, and the amount and duration of the loan.

What affects the credit score?

Delinquencies or not repaying existing loans on time can seriously impact an individual’s credit score negatively. At the other end of the spectrum, having no loans or unused credit cards may also affect your score, as this provides no past repayment track record for a borrower to assess your creditworthiness.

How to increase credit score?

Diligence with regards to payment can have a positive impact on your credit score. Ensuring timely payments on existing borrowings, and in full, make for a good score. Having secured loans such as home or auto loans also help boost your score.

It may also be prudent to keep track of your CIR, as any erroneous entry in the same may hamper your score. For example, say your credit report shows a default on a credit card payment. It is likely that the reason for delay was owing to a dispute with the concerned card company, and payment was made in full once the query was sorted. However, in the interim should this have been reported to the credit bureau as a delayed payment, it may have negatively impacted your credit score. Should you find any discrepancies, it may be a good idea to have them rectified by contacting the concerned CIC.

How to check your credit score?

There are four CICs in India today, viz. CIBIL, Equifax, Experian and High Mark.

Currently, none of them offer free CIRs. What you as an individual can do is, log on to the concerned CIC’s website and choose to purchase your CIR for a nominal fee. In addition, the CICs require some basic information in addition to an online request form, including identity proof and address proof of the individual. Making it convenient are various payment options, and the promise to deliver your CIR within a reasonable turn-around-time.

Freescoreindia.com however does offer the option of availing of a free credit score from Equifax, on registration on the website.

Tracking your credit history has never been easier!