It’s time for office. You grab your bag and rush to catch the bus. This routine has gone on for several years. Ever wondered why you work so hard? Oh…it’s simple. You want to buy your dream home. You have even applied at the bank for a home loan. Unfortunately your dreams have been shattered. The bank has rejected your home loan application…You’re shocked…Something about a bad credit score.
Banks never like to lend blindfolded. They would find as much as possible about you, before they sanction you a loan. When you avail a loan from your bank, the bank creates a credit information report (a detailed report on your loan repayments).Your credit information report is then sent to Cibil, which then assigns a score between 300-900. A score of 750 and above, means your loan is easily sanctioned. A score of 700 is also fine. What happens if your cibil score is below 700? Is this the end of the road for you? No, definitely not. There are ways to improve your credit score.
Your bank sends a report on how regular you are in your EMI payments on your loan, to Cibil. Cibil creates a credit information report on your repayment history (credit history), so that banks get an idea, if you are a good candidate to lend to. This report is made available to all banks.
You need to check your credit report periodically, if you want to ensure a good credit score. You might have repaid your loan, but your bank has failed to update this. Your credit report states that this loan is currently active. Your credit score goes bad. There is also a chance of clerical error or an updating mistake. Banks could have made a mistake while sending your repayment information, or cibil could have made an error, while updating your credit report. In either case you suffer. It is in your best interest to check your credit information report.
Be sure to repay your loans on time. If you repay your loans on time, you will get a good credit score. If you have availed unsecured loans such as a personal loan or even a credit card, pay off this debt quickly. Unsecured loan is a loan without collateral. An unsecured loan charges a very high rate of interest. You must repay this loan as fast as you can. You must break your fixed deposits and use the money, to pay off the unsecured loan.
A personal loan charges you an interest of around 15%-17% per year. A credit card could charge you an interest as high as 30%-36% per year. Your fixed deposit offers you interest of around 7% a year, after taxes. What use is the interest you get on the fixed deposit, if you are paying 2 or 3 times more interest, on your personal loan or on the credit card dues?
You apply for a loan at a bank. The bank makes a credit enquiry, which gets recorded in your credit report. If you make too many enquiries for loans with different banks, you are viewed as credit hungry. Banks will not lend you money, if they view you as credit hungry. Banks feel you are desperate for that loan. Your credit score is also affected, if you make too many enquiries for loans. If you have a bad credit score, try not to make too many enquiries for a loan.
If you have a bad credit score don’t lose heart. There are ways for you to improve your credit score.
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