Credit Repair Do’s and Don’ts

A credit score is an important financial measure that determines your ability to borrow money. Missed EMI payments, delays in paying credit card bills, over utilization of credit are some reasons that may cause a fall in the score. If you have a low CIBIL score, and are looking for ways to get your life back on track, you are at the right place. Here we will give a complete guide to what you should do and what you shouldn’t do if you want to fast track your journey to improve CIBIL score.

Do’s

Review your credit report- Check your CIBIL report to identify the reasons of a low score. A careful review will help you assess your credit behaviour. It will serve as an eye opener as to how small things like a delayed payment can have a drastic impact on your credit score. Also look for negative entries on your report that you may not recognize. If you spot any inaccurate information report it immediately as you may be a vicitim of identity theft. Disputing and getting errors corrected will help to increase credit score.

Pay your bills on time- The simplest way in which you can contribute to increase credit score is to ensure timely payment of EMIs and credit card bills. Payment history makes up 35% of your score. Even a single missed or delayed payment can bring down your score drastically. Sign up for payment reminders through email or phone or set up automatic payments to avoid missing payments. If you are already behind on your payments then create a plan to pay back your debts systematically. Keep a check on your spending habits. Trim down your expenses. Talk to your lenders to work out a mutually convenient way of paying down the balance. Take care of accounts that are more than 90 days late. If your account ends up in collections it will be very damaging to your score.

 

  1. Pay the card balance in full- Credit card balances attract a very high rate of interest. It is best to pay the card balance in full each month. People who pay only the minimum amount due, usually end up falling into a debt trap.

 

  1. Keep utilization levels low- Keep your utilization levels to below 30% of available credit limit. It works well to improve CIBIL score. You can set up alerts that notify you when you reach a certain limit.

Don’ts

 

 

  1. Do not close your old credit cards- The length of the credit history or the average age of accounts affects the credit score of an individual. Keeping old cards active contributes to this factor positively. Moreover if you close your credit cards, your total available credit limit on all your cards decreases, thereby increasing your overall utilization ratio. For example if you have 2 cards each with a credit limit of 50,000/- and a card balance of Rs 25,000/- (on 1 card) then your utilization will be 25,000/1,00,000 i.e. 25%. Closing one card will reduce your total available credit limit by 50,000/- Your new utilization level will jump to 25,000/50,000 i.e. 50% thereby causing a hit to your score. Hence if you wish to increase credit score never close your old credit card accounts. Use the card for small purchases and pay off the balance at the end of the month to keep the card active.

 

  1. Do not apply for multiple credit cards in a short span of time- Each time you submit an application for a credit card, a credit enquiry hits your credit report. Multiple hard enquiries in a short span of time display a credit hungry behaviour. This will decrease your credit score.

 

  1. Do not expect a change too soon- There is no quick fix to improve CIBIL score. A strong positive history develops over a period of time with consistent and responsible behaviour. It needs a lot of hard work, patience and dedication to improve your credit position before you can see some positive changes in your score.

 

It isn’t as hard as it may seem in the beginning. Knowledge of the factors that contribute to your credit score, a systematic plan to work on those factors and dedication to bring about change is what it takes to repair your credit.

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4 Things to Avoid When Picking a Home Loan

A house loan is unlike any other loan you would take in your life. Not only it’s exceptionally big amount-wise, it also has a term duration as long as 20-30 years, which is a lot. In other words, it’s a big responsibility and you must be careful with the decisions you make for it.

You may have read a lot about all the do’s of the home loans like finding a low home loan interest rate, finding the right financer, etc. but the don’ts are equally important to be aware of.

On that note, the following are the top 4 things to avoid when picking a home loan:

  1. Spending Your Life’s Savings

There are certain events in your life where you have to take bold decisions. However, there is a thin line between being “bold” and being “foolish”.

For instance, after searching for a perfect house for weeks you finally found one that makes the cut. However, it’s way above your original budget. So, to fill in the cash-gap you decide to break open your biggest piggy-bank- your life’s entire savings.

Big. Mistake.

Your life’s savings are meant for emergencies, and they might be the only thing to save you from a rainy day. So, it can be a terrible idea to splurge all your savings on a house. Ironically, you may also end up on a loan defaulter list because if you became cash-strapped down the road, you won’t be able to pay the EMIs and you won’t have any savings to use either.

  1. Not Factoring in the Additional Costs

A lot of people forget about the costs that are added to the cost of the property itself. For instance, the cost of the furniture, lighting fixtures, etc. along can easily hit a six-figure. Then there are maintenance costs which include payments to the security guards, sweepers, gardeners, etc. and membership costs (if you bought a house in a society/locality) for gym, clubs, etc.

Your bank will also impose a few charges of its own such as processing fee, transfer fee, etc.

  1. Settling for the Interest Rate Offered

It would be unwise to accept the first offer made to you by your bank for a loan. You have all the right to negotiate the terms and the home loan interest rate itself.

If you have a top-notch credit history and a decent credit score, then you are a good candidate for a home loan. If you are an old customer of the bank and have always paid your credit card bills on time, maintained good relations with the staff, etc. then it’s even easier to get a better interest rate. All you have to do is let them know upfront that you have a spotless credit profile and you have been a loyal customer to the bank, which is why you should be given a better interest rate.

  1. Applying Without Good Credit

Applying for a home loan when your credit report isn’t quite ready yet, can do harm on multiple levels. For starters, a poor credit score will instantly increase your chances of loan rejection. However, if you have applied at several banks, then it will damage your score even further, thus reducing your odds even more.

It’s important that your work on your credit report first before sending out the loan applications. If there are some serious remarks on your credit report such as a mention on a loan defaulter list, settled accounts, etc. then you must get them removed by talking to your bank or the credit rating bureau. Similarly, if there are any discrepancies in loan repayments, current debt, personal details, etc. then you should get them corrected as well.

Only with a good credit report, you can easily obtain a loan at an affordable interest rate.

So, these were some of the most common yet the most important things that you must avoid when applying for a home loan. In doing so, you are sure to save yourself from a lot of trouble and stress.

3 Jobs That Can Be Harder to Get With Bad Credit

It is well known that low credit score hurts your credit eligibility. Did you know it also hurts your job eligibility? Probably not! For this is not a mandatory pre-qualification standard for most of the jobs. However if you are looking forward to make it big in the white collared job market, you probably may miss out that final call due to badly maintained credit score.

Most of us tend to learn from our mistakes. However the latter should not be the golden rule for learning. Whether you have just completed your graduation or someone who is looking forward to enhance their job profile, up-scaling your credit report may help you get hold of better opportunities.

Some employers consider your ability to increase CIBIL score as a reflector of your spotless character. It is likely that employers may initiate a background check for “security” reasons. Many jobs in the banking sector, particularly for the roles in compliance and governance such as those of treasurers, credit manager, loan officer and more require credit check.

All the major lenders including the largest public sector bank of India, SBI, private players such as IndusInd Bank, foreign lenders like Standard Chartered use credit check as a part of pre-employment screening process.

Three jobs that could be harder to get with low credit score are:

  1. Jobs that require high level of Security Clearance: From armed forces to government offices, many professionals require to go through rigorous security clearance. Herein a CIBIL report check is going to be a part of the background check. The purpose of pulling your credit report here would not be to gauge your credit worth but to make out an outline of your financial discipline. Your financial habits speak louder about your character. Thus to make out a better impression on any of the competitive exams such as CIVIL services you need to pay as much attention to your credit profile as to your examination preparation.
  2. Loan Broker
    FinTech sector is in the boom. And if you look forward to make a career as a loan broker, you ought to be really a master of maintaining a good credit history. Brokers are not the loan sellers but the loan locaters. They help borrowers find the low cost loans according to their repayment capacity. Thus before applying for the license you need to successfully put up a certificate for a good character and reputation. Your awesome CIBIL report can serve as the report card for the same.
  3. Bank Employees
    From loan officer to bank cashier, all need to ensure that they do not have red flags in their credit report. Before hiring the staff, banks make it sure that they do not have default or very high credit balance on their name. This adds to likelihood of safe financial conduct by the employees who would be interacting with public funds in large.

These are just a few examples on how bad credit can reduce the gleam of your resume. Not to forget the worst impact of low credit score is on your credit worth. It is very difficult to search loans for bad credit.

You can consider pulling out your free credit report and work for better rating. The most common factors that affect your credit score are: payment history, length of history, mix of credit, credit utilization ratio and recent credit queries. Besides do not forget to check the status of accounts wherein you serve as a Co Applicant or a Guarantor. If any of these accounts are not closed properly, they would appear with red flags in your report too.