Tuesday, 28 November 2017

Credit Scores: Know When to Hold Them

Your credit score will affect your life in more ways than you can think of. Although a large number of people think that credit score is necessary for getting a personal loan or credit card, etc. it’s only partially true.
Apart from affecting your chances of getting a loan or a credit card at an attractive interest rate, your free CIBIL score can also have an impact on your happiness as well.  If there is a big difference between your score and that of your spouse’s then it can affect your marriage. In fact, a low credit score can also lower your chances of getting a job of your choice.
There is literally no dearth of the reasons why you should increase CIBIL score. However, one might wonder, what does a low CIBIL score look like?
How to know where you stand?
If you want to maintain a healthy credit report, it would help you greatly to learn how a credit score works.
CIBIL, which is one of the most popular credit rating agencies of India and partner with a large number of banks and NBFCs, scores on a scale of 300 to 900.
In other words, you can have the lowest free CIBIL score of 300, and the highest of 900. However, the question is, when should you start getting worried?
Above 750:
A score above 750 is considered a good score. So, if yours falls into this category, then there is nothing to worry about. You have a good credit profile, which means not only you will be able to obtain loans easily, you will be able to do so on favorable terms and a low interest rate.
Between 600 and 750
A score ranging between 600 and 750 is considered an average score. What it means is that while you shouldn’t be worried, it would help to take an action. Below 600
If your score is below 600, then it should get you worried. Not only you need to stop your score from dropping further, you should act immediately and try to improve CIBIL score as fast as possible.
You never know when you are going to need a loan, and you want your profile up to the mark for the same.
Improving your credit score isn’t that complicated but it’s not easy at the same time.
The following are some of the most effective things that you can do to improve your score:
1. Improving Repayment Habits
Your repayment history plays the biggest role in the calculation of your CIBIL score. So, if you have made a lot of late EMI payments and credit card payments in the past, then your score won’t be able to increase.
To improve the score, it’s important to take every single loan payment seriously. No matter what happens, make sure that every payment is made on time, every single time.
If you are able to maintain a consistent repayment history, then you can enjoy an impressive credit growth.
2. Improving Credit Variety
What’s your credit history made of? Is it based solely on a personal loan or a home loan? When your credit history is unidimensional, it will help your score only so much.
What you need is to bring a variety in your CIBIL report. So, if you have only taken a personal loan in the past, then maybe you can apply for a credit card. Similarly, if your history is based on just a home loan, then you can apply for a car loan as well. This will surely help your score grow.
3. Capping Your Credit Utilization
Do you max out your credit cards frequently? If your answer is “yes”, then perhaps that’s the reason behind your low score.
You should always keep your credit card usage under control. Ideally, you should never spend more than 30-35% of the limit available on the credit card.
4. Avoiding Sending Multiple Loan Applications
Did you know that applying for a loan at multiple banks at the same time can have an adverse effect on your score? This is because it leads to multiple credit inquiries that are made by the banks to check your credit profile. This raises suspicions and damages your score.
To stop your score from taking any further damage, it’s important to hold off sending multiple loan applications. Instead, send them one by one with a decent gap between them.

For best results, keep an eye on your credit report. Observe the changes closely so that you can act accordingly on time.

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