Tag: credit report

What does it take to have the best Credit Score?

If you need to borrow money, you need to first prove your creditworthiness and show that you can responsibly pay back the debt in time. A high credit score helps you to qualify for almost any line of credit be it credit cards, car loans, home loans or personal loan. It helps to get the best interest rates and terms that the lender can offer. A low interest rate can save you thousands of rupees over the debt term. Considering the impact the credit score has on your financial lives, it is good to strive for perfection and work hard to get the best credit score possible.

So what does it take to improve CIBIL score and get that perfect figure of 850. Well, it needs an understanding of what goes into the CIBIL score calculation, good financial habits, discipline and patience. Follow the strategies mentioned below. These will help you improve score and pave the way to perfection.

Pay on time, every time- Your payment history is the most important factor that is considered in the CIBIL score calculation. So always keep track of the deadlines and make sure that you never miss a payment. A single late or missed payment can bring a dip in your score and move you further apart from your goal. To eliminate any possibility of error you can automate the payments so that the card company can deduct the full outstanding balance from your account at the end of the billing cycle. Set up automatic payments for EMIs of instalment loans as well. Just make sure that there is enough cash in the account to cover the payments. This way you will be rest assured that you’ve taken care of the biggest component that affects the credit score calculation. Build up an emergency fund to cover for unexpected expenses, so that you never have to miss bill payments and incur a credit score damage.

Control your credit card spending- To improve CIBIL score one needs to be mindful of the credit utilization rates. The proportion of credit line that you use as compared to the aggregate credit available should not exceed 30%. If you max out your cards, it shows you in a bad light. The bureaus get an impression that you are overly dependent on debt. So manage your debt wisely and keep the outstanding balances low. Getting a credit line increase too will help in lowering the utilization levels.

Don’t take too much debt too often-Try to live within your means and borrow only when it is absolutely necessary.  Accruing too much debt sends a red signal to the lenders that you are a risky borrower. Every time you apply for loan a new hard enquiry hits your credit report and brings your score down by a few points. Though applying for new credit affects only 10% of CIBIL score calculation, too many enquiries within a short time frame will cause more damage. And when you are trying to improve CIBIL score, every point matters.

Have a variety of accounts- The no. and kind of accounts that you are managing also affects the CIBIL score calculation. Hence it is a good practice to have a mix of credit accounts in your report. Credit scoring algorithms give more weightage if you demonstrate that you can manage both revolving and instalment accounts responsibly.

Keep old accounts open- Length of the credit history is also factored in CIBIL score calculation. If you wish to improve CIBIL score, keep your old credit accounts (that are in good standing) open for a long period of time. Do not close your old credit cards even if you no longer use them. A long history of handling debt obligations responsibly gives a boost to your creditworthiness and helps in winning the trust of the lenders.

Monitor your credit- Once you adopt good financial habits, you need to track your progress. Monitor your credit report on a periodic basis to ensure that it is in good standing. Keep a check on errors and inaccuracies. If you find mistakes, report it to the bureau immediately and get them corrected.

By adopting the above healthy financial habits one can pave the way for the best credit score. Remember consistency is the key. You need to maintain these habits to ensure that your credit score stays on top once it reaches the heights.

6 Ways to Improve Your Credit Score

If you want to give your credit score a boost, then you must understand that it won’t happen overnight. Credit score improvement is a long process. You have to be patient and just work for it. However, if you are careful enough and take the right steps, then eventually you can easily attain a promising score.

The following are 6 of the best ways to improve CIBIL score:

  1. Watching Credit Card Usage

Credit cards can help build a good credit score. However, they can also ruin it. It all depends on how you use them.

Credit utilization is one of the biggest factors that affect your CIBIL score. Using credit cards excessively leads to a high credit utilization which is harmful to your score. However, there are two ways you can tackle this problem:

  • You can limit your credit card utilization by using cash or other payment methods save for credit cards.
  • You can divide your expenses on multiple credit cards. So, if you have to buy an air conditioner worth Rs. 30,000 and you have two credit cards, then you can charge Rs. 15,000 on each.
  1. Paying Bills on Time

Plain-vanilla timely payments can do wonders for your credit score. Not only you can minimize your debt this way, you can also make a strong case for yourself for potential lenders. Banks and financial institutions simply love those borrowers who have a long history of timely payments because it’s easy to trust them with their money.

  1. Fixing Credit Report Discrepancies

How often do you check your credit report every year? If your answer to this is “once” or “never”, then maybe that’s the reason why you are unable to improve score.

There are several benefits of monitoring your CIBIL report, one of which is the identification of mistakes or errors.

It’s easy to think that a mistake or two in your CIBIL report can’t do much harm. However, it’s completely false. Mistakes in credit reports can have grave consequences that include compelling you to get a loan for low CIBIL score.

Taking an example, if your name or address is printed wrong or if there are false mentions of late payments in your CIBIL report, then your score could easily fall by hundred points or so.

Checking your CIBIL report frequently can help you find and rectify mistakes that are hurting your score. Plus, if you identify anomalies or unrecognized transactions, loan inquiries, etc. then you can also prevent a potential case of identity fraud.

  1. Adding Something New to The Mix

A singular credit history can put limitations on your score. So, if credit report contains details of only credit card usage, or a personal loan account, etc. then you can increase credit score only so much.

Even if you are doing all the right things for your score, you can’t surpass a certain limit unless you diversify your credit usage. This is because the more diverse your credit history is, the better it’s for your score. So, if your score is solely based on your credit card usage, then you can make an improvement by availing a small personal loan, auto loan, etc.

  1. Saying “No” to Minimum Payments

Minimum credit card payments and credit score improvement don’t go hand in hand. You can only choose either of the two.

Banks highlight these “minimum payments” to lure more customers into applying for their credit cards. However, minimum payments lead to debt accumulation and lower CIBIL score. So, if you really want to enhance your score then you should always pay your credit card bills in full.

  1. Debt Consolidation

Debt consolidation is not a direct but rather an indirect way to improve credit score. In this, you combine all your loans into one. So, instead of paying several EMIs every month, you need to pay just one. The result is better money management and timely payments.

Many finance experts claim that debt consolidation can help improve CIBIL score really fast, especially if pay the EMIs on time.

If you don’t want a future in which you have to look for a loan for low CIBIL score, then it’s best you start caring for your credit report as soon as possible. In fact, today is as good as any.

Want to increase your Home loan eligibility?

Planning to buy a house? After accumulating all your savings still find it difficult to buy your dream home? Try considering home loans. They give you a helping hand buying your dream space. So how will you prepare yourself for a home loan?

Here are a few points to consider when considering a home loan;

Clear existing loans and credits

If you are applying for a home loan you should first try clearing all your outstanding debts and increase your savings on paper. This will give you a helping hand in terms of increasing your home loan amount and get the maximum out of it.

For Example: if you have a car loan running on your name chances are, that your EMI will be around five to ten thousand rupees. When it comes to a this loan the EMI structure ranges from 900 to 1200 rupees per lakh for different banks like ICICI Home loans, or HDFC home loans or DFHL Home loans. If you’re clearing your car loan while applying for a home loan, you will be automatically appreciating your loan amount to at least five to ten lakhs.

Reduce Credit Utilization

Try not to spend money while considering taking this loan. It can be one of the critical points when it comes to credit worthiness. Put your savings in place, if you find difficult to save money try investing in fix deposits and other financial products. This will give the bank or the financial company an understanding on your financial status and your spending patterns. The more you save the more you have chance to gain trust of the bank.

Avoid Job Change

When you apply for a bank loan the bank not only checks your financial status but also checks your employment patterns. You will be asked about your employment status and the total years of experience. You need to be in a particular company at least for a couple of years when considering home loan .If you have switched multiple jobs in short span of time it’s likely to get your application rejected.

Consider all incomes

If you have multiple incomes which you can show in your bank statement like freelancing jobs, existing property rents etc. try showing all your incomes and gains so that you can boost up your chances of getting a loan and also increase your eligibility for a maximum amount. It can help you be one step closer to your dream house or else you will have to shell out some more money as down payment.

Pool in your spouse
I
f you do not have multiple incomes coming in, you can always take help of your spouse or any earning family member. Many banks consider your spouse’s income as well when sanctioning the loan. There is a fixed pattern behind this, either it should be husband and wife as co-borrowers or it can be father and son. Sibling’s as co-borrowers are not allowed in many cases.

Increase tenure

As we all know these loans are a long commitment, considering government subsidies and offers of low interest rates is always suggested to opt for a long tenure. A long tenure helps you reduce monthly EMIs and live an easy life. If you opt for less tenure the EMI range will increase and that means you will have to work harder for meeting your EMI amounts.

Have a good cibil score

A good cibil score is built when you pay all your dues on time and are financially sound. When applying for this loan if your cibil score is bad then the bank will deny your loan. There are many non-banking financial companies who provide home loans for low cibil score people but the interest rate will be high compared to market standards. Maintaining a good cibil score takes a lot of dedication and cautious moves, so take the steps wisely and maintain the same.

Have good terms with the bank

It is always suggested to do a thorough research on the banks you have shortlisted for a home loan. Always consider that you owe to bank first where you get your salary or keep the savings in. If you are in good terms with your bank, the process gets easy and the home loan sanction is done in no time at all. Choose your banking relationship manager wisely and keep good relations with them.

Taking a home is a huge step in one’s life and loans are one of the ways to achieve what you dream for. You will have an amazing time through the process of getting the loan sanctioned if you adhere simple steps today!