Category: CIBIL score

Is it Worth to Get a Personal Loan Just to Improve Credit Score?

If one is in need of funds for miscellaneous reasons like a luxury holiday, funding education if education loan is not available and so on then personal loans can to the rescue. The applicant can get these loans without much hassle and documentation; if you already have a relationship with the lender then the process becomes much simpler. Often the ease with which one can get a personal loan may tempt individuals to get one even when not necessary; so is getting a personal to try and boost your credit score a good idea. We explore this here.

How Are Credit Scores Calculated?

Credit scores are calculated based on five aspects; they are repayment history, credit utilization, loan tenure, credit mix and enquiries. Thus all payment records for last three years for all loans and credit cards, how much of your credit limit you use, combination of secured and unsecured loans, depth of credit history and hard enquiries made for your credit score contribute to score calculation. Repayment history and credit utilization are the biggest contributors to the credit rating while other three factors though important, make a relatively smaller contribution to the final score.

How Can Personal Score Help In Improving Credit Score?

In case you have a low score and you want to improve it there are various ways to do it, so is a personal an effective way to improve credit score or not? The discussion below focuses on that:

They can be used for debt consolidation: These loans can help you in debt consolidation especially if you have a huge burden of credit card debt. Credit card debt is one of the most expensive debts, not paying your dues on time leads to levying of penalties and interest on overdue amount ranging from 24% to 40%. If this is not paid by the next billing cycle then it will keep mounting and the debt will keep burgeoning. If there are multiple cards where the user is defaulting then he/she will end up paying huge amounts as interest and penalty. In such a scenario a personal loan can help you, this loan will help you consolidate all your credit card debts and they are less expensive as compared to credit card debt. Using a personal loan at lower interest can help you repay the dues of credit card which are at higher rates; this will help in improving the score over time. Managing a single EMI is better than managing multiple credit card payments and the credit card dues will stop reflecting as overdue in your credit report. This will help in reducing the overdue burden and the score will improve.

Another way personal loans can help is using these loan to pay a costly loan. This may not impact the credit score directly but will help in reducing the overall interest burden and will help you make timely payments.

A Word of Caution Though:

If you are planning to get a personal loan for trying to better your credit rating, it is important to keep a few things in mind. Make sure you do not apply for multiple loans, apply at only one place after making sure you comply with all the formalities. Do not apply for an amount more that you require just because you are eligible for it or because it is easy to get one. The amount should be sufficient to serve the purpose for which it is taken.

Do check the interest rate at which the loan is available, an expensive loan will defeat the purpose of getting it. If you score is low then getting a personal loan for low CIBIL score could be difficult. Also make sure that you pay the dues on time and you do not pre pay the loan as missing payments or prepaying a loan can harm the score.

Thus a personal loan can help you in improving your score if you apply and use it with caution.

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What is credit counselling? How does it help to recover low cibil score?

We must have heard or read many things about credit score, credit report, types of credit and much more. But what is credit counselling? Is it something like a therapy? Do we have to go to any psychiatrist or psychologist? Is this related to mental health? So many questions would shoot up with this. We have an inquisitive nature when it comes to knowing a new term. With the internet being done easily available and at our fingertips, things have been easier. The information provided by various websites really help us conquering knowledge. However, it is advisable that when things are very delicate, it’s better to be particularly sure so that no mishap occurs.

What is credit counselling?

The word counselling means to get an assistance and guidance resolving any problems or issues. So credit counselling means getting the assistance and the guidance to resolve any problems or issues related to your credit. Specifically, credit score and credit report related problems.

Meeta, a very sincere and not so outspoken girl, was facing major issues. When she did a CIBIL score check, her score was 610. She was confused that how can that happen? She tried all her methods by which she could get her score up for almost 6-8 months. But nothing worked. She was in a mess and wanted to solve this mystery. But how would she do that? She did all that she could? Now there was a need for some professional help. But who helps in such cases? Was her main question. As per her not so outspoken nature, she was feeling too odd to seek any help from people around her. Then, from somewhere, she came to know about credit counsellors.

She researched it and knew in detail about what does credit counsellors do? How does the whole process work? When one has a bad score or the score is in the red zone, in simple language if the score is below 750 or 700 and even after trying in all directions, the score is not going up, one has to approach the professionals who would help you in that. These are the credit councillors. The one who has knowledge in credit advisory. They are certified and experienced individuals who help customers like Meeta.

When you have low CIBIL score, do not feel helpless. Their certified counsellors are trained on what all the client should do in order to get the credit score back to track. They see the credit report in detail, know the customer’s behaviour, his / her reasons for not been able to pay the EMIs on time. They also have the tie-up with banks and it’s manager who could actually help that cutomer in settling the defaulted accounts. Also, they have tie-ups with banks and NBFCs who could help the customer get the loan even after having low credit score in order to repay the old defaults.

They give step by step assistance on regular bases i.e. one in every week. They help the customer understand the importance of credit score, why not make the default, the consequences and the solutions. As the councillors are certified and experienced, they know what solution will work for that particular customer. It is never generic. If to one person they suggested giving a advice of taking a small secured loan to get the score up, does not necessarily they would suggest the same to another customer. There is always a reason and pattern to how the score had dipped. The curve always differs and hence even the solution differs.

The credit advisory like Credit Sudhaar has certified councillors who are certified under NACCC – National Association of Credit Counselling Certification which is nationwide or ACCC which is Association or Credit Counselling Certification. Once the councillor has cleared the certification, it’s not that from very next day he/she becomes a credit advisory. It takes months of training and polishing and understanding to make a credit counsellor who can help the customer work on their low CIBIL score.

So, if you score is low and nothing is happening while you tried, do not feel hesitant. Just as mental or physical health is important, Financial health is equally important. Stay credit healthy, And don’t let you score ruin your loan approvals.

3 best ways to improve your credit score

Credit score is the most important financial number in today’s times. It determines your ability to borrow money as well as the interest rate that you pay on these borrowings. An excellent credit score helps you get the most favourable interest rate and reduces your cost of borrowing. If you are planning to take a home loan in near future, you must make sure that your credit profile is in good shape. Difference of even half a percentage of interest rate translates into thousands of rupees over the lifetime of the home loan, which usually has a long tenure.

If you haven’t paid much attention to this magical number till now, and do not have a very good score, don’t despair. There are ways in which bad credit can be repaired. But it requires dedication and patience, since it takes a while before you can start seeing results of your efforts. Here are 3 best ways to improve CIBIL score.

Start making payments on time

One of the most important factor that constitutes your score is the payment history. The credit bureau keeps a detailed record of whether you’ve been making on time payments or not. It has all the information of accounts that are past due as well as those that went for collection. All this information goes in the making of your CIBIL score. Hence the perfect way to get your credit score back on track is to make sure that you make payments for all your financial obligations on time. Recent positive activity will help in offsetting the previous negative remarks. Prepare a monthly budget and stick to it, so that you stay on track with the payments. If there are way too many bills that you can manage, consider consolidating your debts. Set payment reminders.

If you do not have sufficient funds to honour your obligations in a particular month, talk to your creditor in advance. If you have a genuine reason, your creditor might shift the payment due date by a few days or months. This will help in avoiding a late payment black mark on your credit report. Remember even a single missed or late payment can bring your score down.

Apart from the future payments, try to bring all your open accounts current. Deal with your past due bills before they go into collections. Payments that are more than 90 days late and accounts that are sold to a collection agency will bring a sharp reduction in the CIBIL score.

Keep a check on your credit card balances

Apart from payment history, another factor that has a major impact on the CIBIL score is the credit utilization ratio. This ratio is calculated by dividing the credit card balances by the total credit limit. People who max out their card limit have a high ratio and tend to be high risk borrowers who may default on their payments. The lower the ratio, the better it is for the credit score. By paying down your credit card balances you help in keeping this ratio low and improve CIBIL score.

If you have huge credit card debts, consider taking a personal loan to consolidate them. You may get a lower interest rate than what you might be paying on your card balances. Moreover, by freeing up your credit limit you will reduce your utilization ratio and help improve CIBIL score.

Though it is necessary to have some credit card activity each month in order to have a good score, do not charge more than 30% of your credit limit. Also remember, even if you do not carry your balances to the next month and pay your bill in full, you may still have a high utilization ratio. That is because most bureaus use the statement balance to calculate the credit utilization ratio. If you use your credit card for most of your purchases, consider paying the credit card balance twice a month. This will help in keeping the utilization levels low.

 

Fix mistakes on credit report

Mistakes in credit reports can also be responsible for bringing your score down. For example if a payment that you made on time is recorded as late, it will affect your score negatively. Clerical errors, identity theft issues are other reasons why there may be errors on the report. That is why it is always recommended to check your CIBIL report regularly and analyse the information to make sure that the records are correct. If you find any discrepancy, you must dispute it with the bureau. Report the mistake to the bureau, and also talk to the concerned lender. Provide necessary proof to validate your claim. Once incorrect information is knocked off your credit report it helps to improve CIBIL score.

So get your free report from the credit bureaus and start working on your credit score.