Tag: cibil report

The Credit Card Secret That Could Boost Your Credit

A credit score plays a very big role in your daily life. The credit score can determine the interest rate when you opt for a loan or any financial product. Even if you have a good credit score which is suffice for taking a loan, there is no harm in boosting your credit score a bit before going for the loan. If you have 700 hundred as a credit score which is excellent but gaining an extra twenty will do you no harm.

But how do we achieve it in short span of time?

So here are some credit cards secrets on how you can boost your credit score from good to excellent which will save you a lot of money.

Don’t keep your credit utilization zero, use it wisely.

It is suggested by experts that one should use some limit of their credit card instead of not using them. We Indians have the tendency to opt for a credit card just for backup purposes and never use it, but this will affect your score more severely rather than using it. Use your credit card for grocery shopping or so which most of the people tend to do it via cash. This practice will not only help you boost your credit score but you also get award points. Determine your usage limit every month.

Pay your bills on time

Once you have used your determined credit limit, do make sure you pay your credit card dues on time. A we all know we need to make payment every 50 days of the limit used, the more regular you are on making payments the more your credit rating boosts. Use your credit card wisely and make payments time to time.  Vice versa if you do not make the payment on time the credit score goes for a toss and then it’s a long way to go.

Don’t close unused credit cards.

If you get a credit card try making small transactions on a regular basis and do not close the credit card account. If you make a decision that you do no need a credit card and paid all the dues related to the same this will affect our credit score. Always keep your credit card open and make small transactions on a regular basis but do not close it.

Don’t get a new credit card unless you need it

Don’t go for a new credit card unless you need one. Getting a new credit card means you will have to use it and sometimes the credit card converts from need to luxury. As you start making luxury expenses, you realize you are paying more than what you expected on the credit card bills. Again you will be stuck with overdue and will find no way out of this.

 

Check for errors on your credit report

Not only you need to pay your dues on time but also check on your cibil report from time to time. You can opt for a free cibil report from various online portals and check for errors, just don’t go through any banks to check your cibil score, so it will indicate that you were applying for a loan and were getting rejected on the same. Get a proper idea about your credit score ups and downs.

This is a few things you can control about credit scores and take it to your advantage. It’s easy to own a credit card, but you can avail the benefits of it if you use it wisely and know the hidden features upfront.

What’s the difference between Soft and Hard Inquiries?

Anytime someone submits a request to the credit reporting agencies to have a look at your credit report, an inquiry is generated. The information regarding the entity making the inquiry, date and reason for the inquiry are captured and recorded on your credit report. But not all inquiries are the same. The key is to understand the difference between two different types of inquiries and how they affect the CIBIL score.

Credit checks are often categorized as hard inquiries and soft inquiries. Let’s see what they mean.

Hard inquiries

Whenever you apply for a credit card, home loan, or any other kind of mortgage you give permission to the prospective lender to pull your credit score and credit report. The information in your report helps them decide whether you are worthy of giving credit or not. A high score gives them assurance that you are a worthy borrower while a low CIBIL score will usually trigger a negative response. So basically whenever you are seeking credit, the lender pulls your credit information and this is considered as a hard inquiry. Bureaus consider that each hard inquiry associated with a new loan, changes the risk factor associated with the borrower. Hence hard inquiries have a negative effect on your score. However they account for only 10% of the overall credit score and therefore bring a dip of only 5-8 points. Factors such as payment history and credit utilization have a greater weightage.

Some situations which will trigger a hard inquiry are

  1. Application for a home loan, student loan, auto loan, personal loan or business loan
  2. Application for a credit card
  3. Mortgage applications
  4. Requesting the credit card company for a raise in credit limit
  5. Responding to a pre-approved credit card offer received.

Soft inquiries

Some situations which generate a soft inquiry are

  1. Initial checks by credit card companies and other loan providers who offer you pre-approved loans.
  2. Background checks conducted by potential employers to ensure that the candidate is a responsible individual with good credit.

 

  1. Periodic checks by credit card issuers to analyse your lending behaviour.

Soft inquiries do show up on your credit report but they are not factored in the credit scoring models. So if you have a low CIBIL score, you need not worry about soft inquiries as they do not affect your credit score at all. Most importantly when you request your own report and score from any of the three credit bureaus, it is counted as a soft inquiry. So doing a self-credit check doesn’t hurt your score at all.

How can one minimize the no. of hard checks?

If you have a very good credit score you may not worry too much about hard inquiries as a few points will not harm you much. But in case you have a low CIBIL score and you wish to get credit in near future then you need to be careful that you are not hit with too many hard inquiries. Multiple inquiries increase your financial risk. Hence it is best to minimize these hard pulls to avoid getting a low CIBIL score. Here’s how.

  1. Before applying for loans check your credit score. Apply only where you are likely to qualify. This way you can minimize the no. of hard inquiries.

 

  1. If you are looking out for the best loan deal possible then make sure you make all your applications within a 30 day period. When credit bureaus notice that you are applying for same size loan they pick up this fact and give a 30-45 day window period for rate shopping. They combine multiple inquiries within this period into just one.

 

  1. In case your landlord wants to check your report, ask if you can submit previous rent receipts, income proofs and bank statements to prove your financial reliability.

 

  1. Time your important loans like home loans so that there is no hard inquiry six month prior to filing your application. This way even minor factors will not affect your ability to get best possible interest rate on home loans.

If you have a low CIBIL score and you are looking at ways to improve it then you must first focus on factors like payment history, credit utilization ratio and the mix of credit. These have a greater impact on your score. Potential lenders give more weightage to these factors than just the number of hard inquiries. Do not get too bogged down by the number of credit inquiries. If you have a solid credit history then temporary setback to the score caused by hard inquiries will not do much harm to your credit health.

 

Why Poor Cibil Score Destroys Your Financial Objectives?

If you have ever applied for a loan or a credit card, then you must know what CIBIL score is. Although it is a lot easier today to get small personal loans, home construction loans etc. the significance of CIBIL score is still there. In fact, its importance is increasing by the day. Today, CIBIL score is not just an assessment parameter considered by private and government banks, and other financial institutions, it can also affect your job prospects, as some banks have started making it mandatory for the job seekers to have no history of loan defaulting or a poor CIBIL score.

It can’t be emphasized enough why you must improve credit score as much as possible. Even if your current score is above average you should strive to make it even better. A good CIBIL score can improve your chances of getting a loan or credit card greatly. On the other hand, having a poor score can literally destroy your financial objectives. Here are a few ways how:

  1. Loan for Low CIBIL Score

One of the biggest problems that a poor credit score can create, is making loans of any kind almost inaccessible. Say, you just married a few weeks back and now you want to enjoy the new phase of your life by purchasing a new house. However, since your score is below average you won’t get a home loan. Even if you did manage to find a lender who is willing to sanction a loan, it is unlikely they are offering low interest home loans. Since you can’t afford to buy a house yourself, you decide to take it nonetheless. This is where the problem starts. Managing finances becomes a nightmare for you soon, as you have to pay huge EMIs every month while taking care of general expenses to run your home. Instead of enjoying your life with your partner you end up spending days under the burden of debt. All this because you didn’t pay attention to your credit score in the past.

  1. Credit Limits

If you have been a loyal and trusted customer of a bank, they can sometimes take that into consideration and approve a loan despite low credit score. However, this doesn’t mean you can get a loan of any amount. The lower is your score the lower will be the credit limit your bank will be able to offer. Thus, getting a loan won’t be as helpful when you can’t the full amount, or at least an amount that is enough. Say, you want to start a business and since you have been unable to bring in angel investors your bank is your only hope. However, considering your score they are willing to offer only half of the amount that you have applied for. How good will it be to you? Arranging the other half can be almost impossible.

  1. Credit Card Issues

A poor credit score can also give rise to a number of issues with your credit cards. Not only getting a credit card approved is a challenge in itself in that case, your approved limit will also be low. This can cause a lot of problems for you financially. Credit cards are an easy and convenient way to get credit. They allow you to buy items you can’t afford on EMI basis. However, with a low credit card limit you will have to arrange funds for several items by yourself. Getting  supplementary credit cards for your family members can also be a problem.

Your CIBIL score is important. If it has been a while since you took a look at your credit report, then you should get a copy today itself. If your score is not good you can start working on it ASAP. Fortunately, it is not difficult to improve credit score. By merely paying your EMIs on time, limiting the overall credit usage, and rectifying errors and mistakes in your CIBIL report (if there are any) can greatly improve your score. However, if you need expert advice you can also consult a professional company such as CreditSudhaar. They have some of the most experienced credit professionals who can help you improve CIBIL score in the soonest possible time.