Tag: credit report

Is Buying a House Good or Bad for Credit Score?

Having your own house is often a dream come true. However, do you know that it can affect your credit score too?

When you buy a house with a loan, then the way you manage the loan repayment and other types of credit during the tenure affects your credit report.

Home Loan Process and Credit Score

One of the biggest mistakes you can make when applying for a home loan is overlooking the importance of CIBIL score check.

There are two main reasons why you should always check your CIBIL score before applying for a loan:

  1. Credit Health

When you apply for a home loan, the banks send an inquiry for your credit report to assess your credit profile. However, this affects your score itself.

If you have applied for a loan at multiple banks at the same time, which many people do to increase their odds of loan approval, then it can have an adverse effect on your report. This is because this behavior is commonly dubbed as “credit hungry”. In other words, it suggests a sense of desperation and may lead to credit score damage.

By performing a CIBIL score check, however, you can see whether your report is in a good state or not. If it isn’t, you can work on it first and then apply for a loan. This way, you don’t have to apply for multiple loans. Since there will be fewer credit report enquires now, there won’t be any credit score damage.

  1. Better Interest Rate

Generally, a home loan has a long tenure which can be as much as 20 years. Thus, you would want to get the lowest home loan interest rate possible. Again, this is where checking your credit score can help.

If your score is low, then you can work on it so that when you do apply for a loan, you can negotiate with the lender for a better interest rate.

Credit Score During Home Loan Repayments

The way you repay your loan can also affect your CIBIL score. In that regard, the following are some of the things you should keep in mind:

Repayment Pattern

One of the most important things that you should be careful about during the loan tenure is the repayment schedule. It’s super important that you pay all your EMIs on time. This is because punctuality matters a lot when it comes to credit score calculation.

If you miss an EMI, then your bank informs their credit bureau about the same. They, in turn, mention this in your credit report under the tag DPD which stands for “Days Past Due”. So, if you pay an EMI 11 days past the due date, then in the accounts section of your credit report there shall be a remark like “DND: 11”.

Remarks like DND can have a big impact not just on your credit report but your score as well. Thus, make it a point to repay all the EMIs on time at all costs.

Credit Report Details

If you want to maintain your credit score, then be sure to conduct a CIBIL score check every once in a while. This is because as you will repay your loan, it’s possible that an error takes place in your report which affects the score.

For instance, your bank may accidentally inform the credit bureau that you missed a payment, or you may become a victim of identity fraud, etc. Thus, by checking your report every few months you can avoid these issues easily.

Improved Variety

While you have to be careful with a home loan, it can also improve your score easily and open more doors for a better home loan interest rate in the future. This is because when you take a home loan, it improves the credit variation in your credit report, assuming that it’s currently based on just a credit card repayment history or a personal loan repayment history, etc.  In fact, the more is the variety, the better is the score.

The bottom line is that home loan can be good or bad for you depending on how you manage it. If you are punctual with your EMIs and don’t accumulate a high debt, then it’s good for you. However, if you delay the payments frequently or simply default at one point, then it can have serious repercussions on your score.


The Future Of Car Loans In India, know them here

Remember the time in the mid 90’s when Maruti dominated the automobile market with 60% market share? 20 years later though Maruti still stands tall with 47.6% share, the face of the industry has changed completely. Over the past 2 decades a number of car manufacturers made a fleeting entry into the market. Now with more than 17 car makers in competition with each other, offering more than 100 different models and variants, the car market has seen a major shift. The annual industry sales have crossed the 3 million mark.

Another changing trend is that the centre of gravity is moving away from the economy segment. Today 90% of the market is dominated by the 4 lakh+ segment. Slowly it is shifting to 6-9 lakh segment. People are upgrading to pricier models.

A big reason behind this growth is that cars have now become a need rather than a luxury. Moreover, the young generation has high income levels and high aspirations. They want to own a vehicle the first thing after they land a job. And why not, if one cannot arrange for funds immediately there are car loans that make this work easier.

As India’s per capital income is likely to touch $3500 by 2020, more and more people are becoming capable to own a 4-wheeler. The car market is likely to reach the 4.5 million mark. Taking advantage of this growing car sales trend are financial institutions who are offering car loans at attractive interest rates.  According to a report by Ernst & Young, the new car financing market in India will double by 2020.

With numerous banks, NBFCs and private lenders offering car loans, a customer has a lot of options to choose from. The car manufacturers are also running their own finance firms. One can get a car loan approval in a flash without much document processing. By paying easy EMI one can easily afford a car without disturbing one’s budget. Loans are offered for both new as well as pre-owned cars, though the rate of interest is slightly higher in case of used cars. The loan to value ratio has gone up. Earlier lenders financed only 90% of ex-showroom price which excluded registration and other charges. But now they are willing to offer 90% of car’s on-road price. Since it is very easy to avail a car loan, people are even going for pricier car models to fulfil their dreams.

ICICI car loan is one such financial instrument that can turn your dream of owning a car into reality. You can get up to 100% of ex-showroom price financed. Long tenures, instant approvals, fast processing and minimal documentation required are some attractive features of this loan. Sometimes the bank itself offers preapproved car loans to its privileged customers.

Like any other loan, ICICI checks the credit score of an individual before approving an ICICI car loan. This score is calculated on the basis of your credit records maintained by CIBIL. If you have a history of on-time payments, you will have an excellent credit score and banks will regard you as a creditworthy individual. You can get low rate of interest and attractive terms on the loan. But if you have a bad credit score then you may not get approved for an ICICI car loan. Hence your CIBIL score plays a major role in the approval process and sometimes determining interest rates too.

Usually a score of 750 and above is considered good. But what if you have a bad credit score? Does it mean that you do not stand any chance of arranging funds through car loans? Certainly not! Many buyers with poor credit rating get their car financed through something called loans for bad credit. After all bad credit score is a very relative term. It is a matter of one’s opinion. If your score is on borderline and you failed to qualify for an ICICI car loan, there are many online lenders who would be willing to offer loans. But since these loans are available at a high interest rate, you need to shop around to find the best loan for bad credit.

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.