However, loan-seekers complain that while banks decide on extending or denying loans to individuals on the basis of their repayment track record, no discounts in interest rates are offered to diligent borrowers. In effect, ‘good’ borrowers end up subsidising the ‘bad’ ones.
Of late, though, banks have been offering concessional terms and conditions to prospective borrowers if their credit history is considered favourable, say credit information companies.
For instance, the loan approval could be quicker, processing charges may be waived or you could be offered a larger home loan.
Also, your credit health impacts the rates of unsecured loans like personal loans, where the interest charged is not uniform for all borrowers. This is because lenders see value in acquiring and retaining customers with healthy credit history.
A blemish-free repayment record often indicates lower chances of default, something that every bank desires. As a borrower, you can negotiate on the basis of a good credit score to gain access to favourable terms and conditions. Credit scores and credit reports can be obtained from credit bureaus.
So, what can a borrower do to bolster his/her credit record and improve the credit score? For starters, he/she will have to understand the reasons behind a low score. It could be due to several reasons, apart from a poor repayment history.
If a bigger portion of your portfolio comprises personal or credit card loans rather than secured debt like home loans, it could adversely affect your score. You need to have a balanced portfolio in order to aim for higher scores. Moreover, ensure that borrowers of loans where you have been the guarantor clear their dues in time. Same would be the case with joint loans, too.
Paying utility bills and cell phone bills as per schedule will also go a long way in improving your credit score, once credit bureaus start incorporating these details into their database
Courtesy : Economic Times