Nowadays, many of our needs and desires, are not financed out of our own pockets.
Someone else is paying for it!
And we repay the amount borrowed… in convenient Equated Monthly Installments (known as EMI in day-to-day terminology).
This, increasing dependence on loan financing, has made the Credit Score a critically important factor.
As you may be aware, Credit Score is nothing but our credit rating. It denotes whether we are a "safe" borrower or a "risky" one.
It is a simple 3-digit number — between 300 and 900 — that summarizes our borrowing history (home loan, personal loan, vehicle loan, credit card, EMI financing, etc.)
Briefly, the score and level of risk it signifies, is as under:
850 - 900 : Very Low Risk
750 - 850 : Low Risk
650 - 750 : Moderate Risk
500 - 650 : High Risk
300 - 500 : Very High Risk
Earlier, when the number of individual borrowers was small, each bank or lender used to do its own due diligence before lending money.
However, with increasing number of borrowers and many borrowers accessing more and more loans, this task is becoming difficult.
As such, most lenders nowadays rely on your Credit Score and Credit Report... at least as a first step to processing your loan or credit card application.
Clearly, therefore, if you don't have a good Credit Score, your application is liable to be rejected. And, you could be deprived of loan finance. Sometimes, this could be for critical need such as home, children's education or a medical emergency.
Hence, it is extremely important for you to maintain a high Credit Score.
Not only that:
High Credit Score also translates into lower interest cost. Naturally. Lenders prefer borrowers who would pay their EMIs on time. So, they are often willing to lend at cheaper rates to low-risk borrowers. In short, cost saving for good borrowers.
In fact, high Credit Score also denotes good financial health. Therefore, even if you don't intend to borrow money, maintaining a good Credit Score would automatically translate into financial well-being in general.
As a first step, therefore, you should immediately get hold of your Credit Report including Credit Score.
The good news here is that, w.e.f. Jan 2017, you are eligible for one FREE COPY of your credit report per year.
If you already enjoy a high Credit Score, well and good. However, if you find yourself in the danger zone, it's time to act.
Listed below are 7 simple ways to improve and build a good Credit Score.
1. No more late payments or defaults
You have to pay on time. No lender likes to see its payment coming in late.
Therefore, henceforth, ensure that you make timely payments of all your loan EMIs, credit card bills and other repayments. This is the sure-shot way of adding big points to your Credit Score and improving it significantly.
Good payment history = Good credit score
2. Don't borrow up to the limits sanctioned
High outstanding balances negatively impact the Credit Score.
Therefore, just because you have been sanctioned a certain credit card limit, doesn't mean that you should utilize it fully. Ideally, keep your usage at 1/3rd of the maximum limit. To the lender, this is a sign of your financial prudence. It shows that you are able to manage your expenses efficiently, as close as possible, within your income levels.
Low credit usage = High credit score
3. Reduce the number of credit cards and loans
Too many loans and credit cards indicate wasteful financial behaviour.
As such, take immediate steps to cancel all your credit cards, except one or two. Also, if possible pay off small loans through own funds or through debt restructuring and debt management. And, see your score soar to new heights.
Lesser number of loans and credit cards = High Credit Score
4. Improve your Credit Mix
There are two types of credits or loans, namely secured and unsecured. Secured loans give comfort to the lenders. Unsecured loans give them nightmares.
Hence, reduce your unsecured loans and credit card outstanding (these too are unsecured borrowing) to the extent possible. Or convert them into secured loans. Or take a secured loan to pay off the unsecured loans. This will improve the ratio of secured to unsecured borrowings and consequently your score.
Higher percentage of secured borrowing = High Credit Score
5. Stop further loan or credit card inquiries
Making too many loan inquiries, sends a wrong signal to the lenders. It indicates that you may be having difficulty in managing your finances. Hence, you are in constant look out for any external financial help.
Therefore, unless it is a dire need, don't apply for any further loans and credit cards. Show that you have the capability to be financially disciplined.
Lesser number of loan / credit card applications = High Credit Score
6. Stop being a guarantor for others
You are not the borrower, when you stand as a guarantor for someone else's loan. Yet, it is a "contingent" liability in your name. If the person defaults, you have to pay up.
Since there is an element of risk involved in being a guarantor, lenders have to factor in the same. As a result, it lowers your Credit Score.
Lesser number of loan guarantees = High Credit Score
7. History matters a lot
New borrowers haven't yet proven their credit worthiness. Old borrowers have a long history of loan servicing.
Therefore, you have to give yourself time. As the good record of your loan repayment builds up, your Credit Score too would move up. There are no "instant" solutions. So don't be fooled if someone offers you quick-fix ideas. They are bound to be fake.
Longer (good) credit history = High Credit Score
Concluding: Act Now.
Get your Free Credit Report immediately.
Focus on the areas that need improvement.
Having a 750+ Credit Score is a must.
You "owe" it to your family.
Someone else is paying for it!
And we repay the amount borrowed… in convenient Equated Monthly Installments (known as EMI in day-to-day terminology).
This, increasing dependence on loan financing, has made the Credit Score a critically important factor.
As you may be aware, Credit Score is nothing but our credit rating. It denotes whether we are a "safe" borrower or a "risky" one.
It is a simple 3-digit number — between 300 and 900 — that summarizes our borrowing history (home loan, personal loan, vehicle loan, credit card, EMI financing, etc.)
Briefly, the score and level of risk it signifies, is as under:
850 - 900 : Very Low Risk
750 - 850 : Low Risk
650 - 750 : Moderate Risk
500 - 650 : High Risk
300 - 500 : Very High Risk
Earlier, when the number of individual borrowers was small, each bank or lender used to do its own due diligence before lending money.
However, with increasing number of borrowers and many borrowers accessing more and more loans, this task is becoming difficult.
As such, most lenders nowadays rely on your Credit Score and Credit Report... at least as a first step to processing your loan or credit card application.
Clearly, therefore, if you don't have a good Credit Score, your application is liable to be rejected. And, you could be deprived of loan finance. Sometimes, this could be for critical need such as home, children's education or a medical emergency.
Hence, it is extremely important for you to maintain a high Credit Score.
Not only that:
High Credit Score also translates into lower interest cost. Naturally. Lenders prefer borrowers who would pay their EMIs on time. So, they are often willing to lend at cheaper rates to low-risk borrowers. In short, cost saving for good borrowers.
In fact, high Credit Score also denotes good financial health. Therefore, even if you don't intend to borrow money, maintaining a good Credit Score would automatically translate into financial well-being in general.
As a first step, therefore, you should immediately get hold of your Credit Report including Credit Score.
The good news here is that, w.e.f. Jan 2017, you are eligible for one FREE COPY of your credit report per year.
If you already enjoy a high Credit Score, well and good. However, if you find yourself in the danger zone, it's time to act.
Listed below are 7 simple ways to improve and build a good Credit Score.
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| 7 (extremely) easy steps to build a good Credit Score |
1. No more late payments or defaults
You have to pay on time. No lender likes to see its payment coming in late.
Therefore, henceforth, ensure that you make timely payments of all your loan EMIs, credit card bills and other repayments. This is the sure-shot way of adding big points to your Credit Score and improving it significantly.
Good payment history = Good credit score
2. Don't borrow up to the limits sanctioned
High outstanding balances negatively impact the Credit Score.
Therefore, just because you have been sanctioned a certain credit card limit, doesn't mean that you should utilize it fully. Ideally, keep your usage at 1/3rd of the maximum limit. To the lender, this is a sign of your financial prudence. It shows that you are able to manage your expenses efficiently, as close as possible, within your income levels.
Low credit usage = High credit score
3. Reduce the number of credit cards and loans
Too many loans and credit cards indicate wasteful financial behaviour.
As such, take immediate steps to cancel all your credit cards, except one or two. Also, if possible pay off small loans through own funds or through debt restructuring and debt management. And, see your score soar to new heights.
Lesser number of loans and credit cards = High Credit Score
4. Improve your Credit Mix
There are two types of credits or loans, namely secured and unsecured. Secured loans give comfort to the lenders. Unsecured loans give them nightmares.
Hence, reduce your unsecured loans and credit card outstanding (these too are unsecured borrowing) to the extent possible. Or convert them into secured loans. Or take a secured loan to pay off the unsecured loans. This will improve the ratio of secured to unsecured borrowings and consequently your score.
Higher percentage of secured borrowing = High Credit Score
5. Stop further loan or credit card inquiries
Making too many loan inquiries, sends a wrong signal to the lenders. It indicates that you may be having difficulty in managing your finances. Hence, you are in constant look out for any external financial help.
Therefore, unless it is a dire need, don't apply for any further loans and credit cards. Show that you have the capability to be financially disciplined.
Lesser number of loan / credit card applications = High Credit Score
6. Stop being a guarantor for others
You are not the borrower, when you stand as a guarantor for someone else's loan. Yet, it is a "contingent" liability in your name. If the person defaults, you have to pay up.
Since there is an element of risk involved in being a guarantor, lenders have to factor in the same. As a result, it lowers your Credit Score.
Lesser number of loan guarantees = High Credit Score
7. History matters a lot
New borrowers haven't yet proven their credit worthiness. Old borrowers have a long history of loan servicing.
Therefore, you have to give yourself time. As the good record of your loan repayment builds up, your Credit Score too would move up. There are no "instant" solutions. So don't be fooled if someone offers you quick-fix ideas. They are bound to be fake.
Longer (good) credit history = High Credit Score
Concluding: Act Now.
Get your Free Credit Report immediately.
Focus on the areas that need improvement.
Having a 750+ Credit Score is a must.
You "owe" it to your family.
