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As per a recent survey, more people would feel embarrassed to admit their credit score than their salary. So, just like you take immense care of your health, you also need to take care of your credit score.

What is a credit score?

Credit score is a score that reflects your credit worthiness. It is based on the factors which take into account your credit record, timeliness in payment of your loan instalments, credit limit and credit hungriness.RBI has mandated that all banks should check the CIBIL score before providing loans. Hence, banks look at this score to decide whether to provide you a loan or not and if to provide, then at what interest rate. High score of CIBIL helps in negotiating for better rate of interest.

This article would help you to improve your credit score. But remember, it is not a race car that you start the engine and instantly feel the result. It's a gradual process that happens over a period of some months if you follow the right path consistently. These are the 5 amazing ways which would help you to improve your magical score, a credit score :

1) Keep a track on where you stand: Check your CIBIL report and know your score and report. It is a report card for your credit where marks range from 300-900.Higher your score is, more lenders are attracted and better you can negotiate for low rate of interest.700 is considered as an ideal number above which your chances to get a loan are high. If your score is below 700, you need to improve your credit habits that we would discuss in further points. You can check your CIBIL score on CIBIL website.

2) Timely payment: Pay your EMIs (Equated Monthly Instalments) before the due date. Every delayed or missed payment affects your credit score badly. You need to be disciplined in your payments and best ways to ensure timely payment are use of reminders, alerts or ECS facility.

Although you can get back to track by making regular payments subsequently but as they say avoiding a mistake is better than making up for it.

Also, if you settle your loan or your loan is written off, your credit score will experience a significant decline.

3) Avoid reckless utilisation of credit limit: If you have a credit card and you utilise major percentage of your credit limit, then you are going to adversely affect your credit score. Suppose Mr. Rich has credit limit of Rs 1,00,000/- and he utilises Rs 90-95,000/- per month. He paid all the instalments on time and to his astonishment, his CIBIL score still declined. It was just because he utilised major portion of his credit limit that reflected his overspending behaviour. So, use your card smartly and only when it is necessary.

4) Right mix of secured and unsecured credit: Unsecured credits are more riskier than secured ones. Too much dependence on unsecured credit like credit cards and personal loans reflect weak financial backbone of a person while secured credit in one's portfolio maintains a healthy credit score of a person. Eg: Having a housing loan means credit for house, an appreciable asset, i.e., strong financial foundation.

So, it is important to maintain a right mix of secured and unsecured credit. For Rs 100 credit, Rs 80 as secured and Rs 20 as unsecured credit can reflect an ideal situation.

5) Avoid desperation for credit: Credit hungry behaviour will have a negative impact in your credit score. Credit hungriness can be identified from number of loan inquiries you made in recent times. A person making numerous inquiries for personal loans, home loan and car loan within a time period of 6 months won't give a good impression. It is assumed that he is showing too much desperation for funds.


Minimum number of loan inquiries only when funds are actually needed help you to keep your credit score healthy.

Keeping just these things in mind and having a responsible credit behaviour coupled with disciplined payment can help you maintain a high credit score.

REMEMBER: HIGHER YOUR CREDIT SCORE, BETTER YOU CAN NEGOTIATE FOR LOW RATE OF INTEREST!

By CA Sagar Khubchandani


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