Does Your Credit Score Say Something About You?

Your credit score matters in many ways. It is a direct representation of your creditworthiness, which is why if you have a good credit score you can get loans and credit cards at attractive interest rates. You won’t even have to apply at several banks for any of those, as they would be much willing to lend you a loan of any kind.

Since more and more companies have started checking the credit score of the job applicants, you won’t have to worry about your career as well if you have a decent credit or CIBIL score.

Broadly speaking, your credit score and credit report sheds light on three major aspects:

Financial Health

Your credit score shows how healthy you are financially. If you have been paying your loan EMIs and credit card bills on time, and if you don’t have a large outstanding debt which is increasing, then your credit score will be above average. In other words, if you are financially sound then your credit score will be high.

On the other hand, if you have a habit of delaying loan EMIs and have a history of loan defaulting, then your credit score will be low.

Risk Profile

Banks and financial institutions refer to credit reports to assess the risk profile of the applicant. Factors like repayment history, annual income, credit utilization are all mentioned in your report and shape your credit score. These factors represent your risk profile and help a lender in making a decision on your loan application.

Personality

While your credit score’s primary association is with your financial standing, it represents your personality traits as well:

  • Management Skills: You have to be good at management, at least to some extent if you want a good credit score. This is why the individuals who have a high CIBIL rating are generally perceived as reliable.
  • Integrity: A poor credit score often stems from an instance of defaulting. While some people default on a loan because they are not able to keep up with the instalments, lose their jobs, etc. some people do so on their own accord. Thus, a high score is also an indicator of integrity.
  • Responsibility: If your credit utilization is high then your credit score is likely to be low. The same happens when you apply for loans or new credit cards frequently. These are the signs of credit-hungry behaviour, and a lender can easily get to know about it by looking at your credit score.

So, we have established now that your credit score is really important, which is why you should perform a credit check at least twice a year. If your score is going downhill then it’s best if you act immediately to prevent further damage. But how do you do that?

How to take care of your credit score?

The first thing you need to understand about your credit score is that, it is based on several factors. While different credit bureaus may prioritize these factors differently, they all contribute to your score nonetheless. These factors are:

  • Repayment history
  • Total outstanding debt
  • Length of your credit history
  • Forms of credit used in the past
  • Credit utilization ratio

Now let’s take a look at them one by one:

Repayment history: For a good CIBIL score it is important that you repay your loan by the due date. Make sure you also pay your credit card bills on time without fail.

Outstanding debt: A high debt is never good for your credit score. If you already have multiple loans under your name and you are also using credit cards, then it’s a good idea to avoid taking any other loans until you have cleared a sufficient amount of debt.

Length of credit history: Usually, the longer is your credit history, the better it is for your credit score.

Forms of credit used: Using different credit forms, such as personal loans, credit cards, mortgage, etc. can increase your score as compared to using only a single type of credit.

Credit Utilization Ratio: You must not use your credit excessively if you want to build a good credit score. Thus, use your credit cards only when you really need to.

Your credit score says a lot more about you than you think. Thus, it’s important you keep an eye on it and take appropriate measures when you see it drop.

 

How to save on car insurance?

Auto insurance is a must if you own a vehicle, but no one wants to pay a rupee more than what is required. By knowing what factors affect the auto insurance premium rates you will be able to get a good coverage while protecting your finances. Remember car insurance is not a fixed cost that you need to spend every month. So don’t be complacent. There are discounts offered and you should be aware of them in order to grab them.

Here are 5 best ways that will help you save a considerable amount of money on car insurance each year.

  1. Increasing the deductibles – A deductible is the amount that you pay from your own pocket before you get the benefits of insurance at the time of filing a claim. If you raise your deductibles it will lower your annual premiums on car insurance Of course there is a trade-off involved as it increases your risk exposure. You will have to shell out a greater amount in case of an accident. Also you will not reach out to the insurance company for smaller repairs where the cost involved is less than the deductible that you have set. This route of saving money is advisable only if you have a history of safe driving. If your driving history is not very impressive then this option may not work in your favour. It will not make sense to pay high deductibles at the time of claims when accidents occur to save a few hundred rupees every month.

 

  1. Buy only what you need– Your insurance needs when you buy a brand new car and take out a car loan to pay for it are completely different than when your vehicle becomes old. When you have a car loan you are required to take a comprehensive and collision coverage. Collision coverage comes in handy in case of an accident while a comprehensive coverage pays for car repairs that occur due to theft or natural factors. When you buy an insurance cover carefully assess what you need. If you do not have enough savings to pay for repairs in case of damage or theft you would definitely need a strong financial safety net in the form of comprehensive and collision coverage. But if the car model is very old and the annual premium does not justify the car value you may give up on certain protections.

 

  1. Drive carefully to seek discounts– Insurance companies offer a lower premium to people who have not had any violations of traffic rules or accidents in a specific period. So if you have a good driving record you can reap its benefits by saving on auto insurance rates. Driving fewer kilometres per year and taking advanced driving courses also helps in grabbing some discounts. So if you’ve engaged in carpooling or if your office is near to the place of residence you can reach out to the insurance company to get lower premium rates.

 

  1. No claim bonus– If you do not make any claims under your existing policy you can get rewarded for it in the form of no claim bonus. Once the policy matures you can use this bonus to renew the policy at discounted premium rates.

 

  1. Good credit history-A good credit score can help you secure low insurance premiums. People with a good credit are considered to be safe drivers who do not file many claims, while people with a bad credit are considered as risky drivers. While this may seem illogical to you, insurance companies base their decisions on this rationale. They use the credit score of an individual to gauge the risk and determine the rates for the car insurance policy. So if you have an impressive credit history you can save a lot of money on insurance premiums.

 

  1. Shop around- There are a number of factors that affect the insurance rates and the only way to ensure that you pay the lowest premium possible is to shop around. Car insurance rates differ considerably between companies even for the same level of coverage. So get quotes from several insurers to compare the offers and select the best deal. There are various websites that help you get multiple online quotes at once and even compare them conveniently from the comfort of your home.

Saving on car insurance is all about knowledge and research. If you invest time and effort in understanding the factors that affect the rates and work on them to use them to your advantage you are sure to get the best deal.

Are you paying huge money for your auto loan?

All of us enjoy lavish lifestyle. And with availability of different types of loans in the market, it gets easier to splurge and live an exuberant state of life.

However at times, we spend more than what we need and it gets really hard to arrange for payouts of the loan. One of the commonly misused loans is an auto loan. Despite meeting all the formalities and checking the car loan eligibility sometimes you end up buying a really expensive new car and realize later on that you are paying a lot more than your comfortable means.

Sometimes, a failure in a business plan or shortage of funds could force you to do away with this added burden of life. But how to get away with the financial obligations when in the middle of a loan term—is a bigger question. For, failing to payback a loan installment can bring a red flag in your CIR and ruin the score for a very long time. After you fail to pay back EMI, it gets really difficult to clean the credit report. With a red flag, only question that would hover you mind is how to get a loan with low CIBIL score

So it is better you take the right steps beforehand and find out what all you can do when you are paying huge money for auto loan.

  1. Know the Car Valuation

First things first, find the market value of your car before you make any decision. You need to know your car’s worth and how much loan is pending and make a decision accordingly. You can easily calculate valuation of your car online on any of the auto selling portals. Just by filling details about your car such as date of manufacture, model, and condition, its valuation will be made. Alternatively, you can visit car dealers to know about the price of the similar deals and make up your mind.

Now after you know the value of your car, you know that if it is worth pulling the loan further.

  1. Sell the car

Well, it might not be the easiest of the options, but it is the wisest one. When paying your car loan EMI becomes a burden it is better to get rid of it all together. Selling the car gives you money which you can use to repay the loan and close the hard time forever.

The financial emergency would end and emotional difficulty may start as a follow up. You would need a lot of courage to get used to a lifestyle without a car. The need of the hour would be to use this opportunity to mend your finances and get back to a good credit score. You can buy a car within your budget later on.

  1. Refinance your loan

If you do not want to part away from your car, you should opt for refinancing. It enables you get better interest rate from some other lender. The new lender would pay for the current lender and you will pay to new lender at new rate.

Refinancing of loan works well when you haven’t made many installments. Also, by refinancing focus should be on reducing the car EMI and saving some cash in hand.

  1. Transfer the loan

Transferring the loan is basically transferring the ownership of loan to third party. For this, you need to check your bank’s regulations. These arrangements work the best when you have a friend or any other trusted party to assume your payments. However being a financial transaction, it is important that you get the loan transfer formally.

  1. Save on your car expenses

If you are able to make the installment with some of the difficulty, you may still continue your loan with certain change in your spending habits.

First of all you can save on your car insurance and car service expenses. Next you should make a budget so that you know what comes in and where it goes. You should maintain all the expenses and income. Use a mobile app to keep track of your expenses. It will help you outline the expenses you can do without. Hence you would save enough to retain some money during this hard time.

As important it is to save some funds month on month, as is to add some income avenues. Gradually the change in your financial habits would make your auto loan affordable to you.