Tag: how to boost your credit score

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.


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.

How different is a Secured Credit Card from a Normal Credit Card?

A few decades back credit cards were something not heard off, however in present times they are almost like a necessity for quite a few. Almost all banks offer a wide range of card variants, with different credit limits, different rewards structures, varied joining fees or no fees etc. Apart from the above differences, credit cards can differ in another aspect too; they can be either secured or unsecured. Unsecured cards are what we know as normal cards issues by card companies. Below we focus on understanding the difference between both.

shutterstock_319847573What is a Secured Credit Card?

Secured credit cards as the names suggests are issued against a security. So if you want a secured card the bank will ask you to have a fixed deposit with them; the card will be issued against the deposit held by the bank. The credit limit will be fixed at 60 to 70 percent of the deposit value. So if the deposit value is Rs. 80,000 then the credit limit for the card holder could be anything ranging from Rs. 48,000 to Rs. 56,000 depending on the issuer’s guidelines. Rest the card works the same as a normal credit card.

How are Secured Credit Cards Different?

The first difference is obviously the way in which these cards are issued. Secured credit cards require a deposit while other cards do not require any such deposit for being issued. For issuing an unsecured card the card issuer focuses on the credentials and the income eligibility of the applicant. The sanctioned credit limit in these cases depends on the income eligibility of the applicant. While for a secured card it will be based on the size of the fixed deposit and the card issuer’s policy regarding how much percentage of the deposit they are willing to extend as credit limit. Owing to this reason unsecured cards offer more financial flexibility to an individual.

Unsecured credit cards are meant for those with a good credit score or those who do not have a blemish on their credit report while a secured card is the opposite. It is specifically meant for those who do not have a good credit rating which will make it difficult for them to get a card in the normal course. Thus for those with a low credit rating these cards could offer a perfect solution. So if you want to get a card issued despite a low rating or are wondering on how to boost your credit score then a secured card can help you. Card issuers are assured that they have a safety net to fall back on in case the card holder defaults.

All card issuers will not issue secured cards thus the options of getting them are limited while almost all financial institutions do offer a host of variants for normal credit card. Secured credit cards may be more expensive than normal credit in terms of fees and interest rates. They are generally offered by banks that also have deposits as part of the products and services offered to its customers.

So if your credit card application is not being accepted as you have defaulted on your EMIs or dues in the past or because you have made too many loan enquiries then a secured credit card could offer you a way out. It could not only help you in getting a card but also in rebuilding your credit rating.