This is why you should track credit report to maintain a healthy record

Are you a health freak? Are you one of those who wake up at 5.30 in the morning and goes to work out on a daily basis? Have healthy food throughout the day and is rigorous about maintaining the perfect health? If yes, have you ever thought of your financial health? Isn’t that important as well? A healthy financial health will lead you to money miracles and if failed to adhere it can cause you a lots of problems.

What is the main essence of a good financial health you ask? It’s nothing but a good credit score. A credit score is a representation of your personality in eyes of a lender on how you are doing financially. There are ranges of credit score which will determine if you are credit worthy or not. You will pray to be on a higher of the score as it opens lots of doors to financial products to avail.

Here are some tips on tracking your credit report and maintain a healthy record,

Know your credit score

Many people make this mistake and never check their credit score on the first place. They only happen to know this term when they are applying for a loan or a financial product. Get your free cibil report and check what your score looks like. Is it bad, good, worse how much do you need to work on the same?

Keep a track

Your financial transactions are recorded frequently by your lenders to the credit bureaus. These transactions are like a summary of your financial well being and how your future lender will see you. It’s important to keep track to understand if the actions are helping you improve your cibil score.

Fix your details

Credit bureaus tend to make lots of mistake while entering your transactions towards your account. You need to check and report any errors you see when it comes to the transactions on your report. Not only transactions, but every details like your name, surname is to be rectified as this can lead to major problems like identity theft.

Only borrow what you need

When it comes to availing a loan or a credit card, always check your requirement. Do not avail more than you need as this will cause you a lot of damage financially. Just because people have pre-approved loans and open credit, they misuse their finances and then face lots of issues financially. If you think you happen to have a lot of open credit accounts than you need, try closing them with ease and try buiding a secured financial future.

Be smart when applying for a credit

When you are applying for a loan, it’s tempting to apply towards a few credit providers just to see how the market can favor you while applying for a loan. This practice can not only deny you a loan, but can also take a toll your credit score. When you apply for different loans or credit cards every enquiry is counted as hard enquiry and is recorded on your credit report. These enquiries stay on your report for a very long time and are visible to your future lenders that you made multiple applications to avail a loan in the past.

Do not miss on any payments

Life is tuff, we understand that and due to unconditional situations, you may miss on payments. Do not do that! It’s really important to make all your payments on time and maintain that financial integrity so that your credit score is maintained and you also don’t encounter any late fees and penalties.

Maintaining a healthy record sounds like a lot of work, but it can be a savior when it comes to availing a financial product. Few simple steps towards maintaining a good finance can help you in many ways you cannot imagine.

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.

Application Checklist for you before Taking A Loan

Personal loan is a very convenient way of borrowing money from banks and NBFCs to meet any immediate financial need. The process is extremely fast and simple provided you have all the documents required in order. Since personal loans are unsecured, banks need to ascertain the credit risk associated with the borrower before sanctioning the loan. They approve of a certain loan amount depending upon the repayment capacity of the borrower. They require you to submit proof of income and some other important documents to ascertain your eligibility for the loan.

There are some important things that one must take care of before applying for a personal loan. Here is an application checklist that will guide you if you are availing for the personal loan for the first time.

Checking the credit score

Since banks use your credit score to determine your eligibility for the loan, it is a good practice to check your score yourself first to know your chances of approval. Order your free credit report from any of the three credit rating agencies to analyse your credit standing. Having an excellent score helps in instilling confidence in the lenders and bargain for an attractive rate of interest. However, if you don’t have a very good score you can opt for personal loan without CIBIL score that are available at exorbitant interest rates.

Finding the Eligibility criteria

Different lenders take into consideration different factors to ascertain a person’s eligibility for the loan. Find out the eligibility criteria of the specific lender with whom you wish to apply for the loan. Check the parameters like age, occupation, income and credit score before proceeding with the application. Get a list of documents required so that you have all the relevant paper work when you apply for the loan.

List of required Documents

Contact your lender and get a checklist of the documents that you need to submit along with your application. The requirements of the documents vary based on the profession, income and loan requirements. However there are some common documents that you must have in handy. For an ICICI Personal loan you may require

  1. Valid Proof of identity- A copy of passport, PAN Card, Voter Id Card or driving licence serve0s as a proof.

  2. Proof of address – Copy of passport, Aadhaar card, rental agreement, utility bill, ratio card.

  3. Proof of Age

  4. Financial documents

  • For salaried employees- Bank statement for last 6 months, Salary slips of last 3 months, Form 16 for last 2 years, Employment certificate or appointment letter

  • For self-employed Individuals- Bank statements of savings and current account, proof of office address, ownership proof, Income tax returns of last 2 years, detailed financial audit including Profit and Loss statement and Balance sheet. Since the source of income of self-employed individuals is riskier than that of salaried individuals, these documents help in providing an assurance to the bank that they have a steady inflow of funds.

  1. Passport size photograph

Since personal loan is unsecured in nature, the lender verifies the documents thoroughly to make sure that the borrower has the capacity to repay the loan.

Interest rate charged

The rate of interest determines your monthly EMI on the loan. Find out the best rate that you can get. Also look at the processing fees, late payment charges, prepayment fee etc. It is important to have a clear understanding of these charges before you apply for the loan.

Repayment plan

Use the EMI calculator to plan your repayment in advance and choose a tenure that suits your budget. Take into consideration any major changes in your income or expenses that you expect in near future. Being realistic helps in avoiding any future defaults on loan that may adversely affect your CIBIL score.

Taking care of this essential checklist will ensure that you get approved for a personal loan at good terms and rate of interest.

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!

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!

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 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 Arranging My Debts Help Boosting My Credit Score?

A credit report provides a comprehensive picture about one’s credit position. The credit score which is an important part of the report factors in various variables when calculating the score and this rating helps in predicting an individual’s creditworthiness. In case you have a low score then there could be a variety of reasons for it and depending on the problem you can solve it using various solutions. Arranging your debt can help you in boosting your credit score. Let us consider a few ways in which arranging yore debt can give a boost to your credit score.

  • Consider Balance Transfer:

Balance transfer is an option that can help in better management of debt. This option can be useful both for home loans and in case of piled up credit card debt.

Home Loans run for long tenures and it is possible that during this time the interest rates change a couple of times. If you realize that the loan you took years back is at a higher rate than the current prevalent rate for home loans in the market then you could consider getting a home loan balance transfer after weighing the costs and benefits. A lower interest rate could help lower you over all liability and you may find it easier to pay your reduced installments in case you are struggling with the repayment. Longer loan tenure if agreed by the new lender can also help you in repayment.

Credit card debt is the most expensive form of credit. If you are struggling with repaying your credit card dues then balance transfer could help you. In this process you transfer your unpaid dues on one card to another card (preferably one that charges a lower interest rate), the new card company provides some interest free holiday before you need to start repaying your dues which can help the card holder. The acquiring card company may also allow repayment in EMIs which can help in boosting your score.

  • Fore-Closure Could Help in Certain Cases:

All loans and credit card dues are included in the CIBIL Report, one aspect that influences credit score calculation is the balance between secured and unsecured loan. In case your unsecured loan (personal loan, credit card dues) burden is higher than secured loan burden then it could impact your credit score negatively. In such a scenario fore-closing these (unsecured) loan could help in boosting the credit score. Though loans that run the full course are better for the credit rating in the long run but in some instances a prepayment may help.

  • Prioritize your Debt

Needless to say repaying all your dues on time and regularly is important. However if you have too much debt and are struggling with repaying them then you must consider prioritizing the repayment. Repaying one which has the highest interest burden could be a good way to start. However it is important that you list out all your debt along with their interest, overdue amount and remaining amount. If you find it tough to repay all you monthly dues then you could talk to lenders and request a loan restructuring. Here the loan tenure is increased which lowers the EMIs and makes it easier for you pay your monthly dues. You aim should be not to allow interest fee and penalties to add to your debt burden. This is definitely not one of the ways to improve credit score fast but could give you results in the long term.

Ideally one should not reach a position where their debt burden becomes so high that they find it difficult to repay their monthly dues. However in case this does happen then you should consider rearranging your debt in an attempt to better your credit rating.

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.