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Credit Score Insights and Tips to Apply Them

23-Aug-2017 written by : FSI-Team

Credit Score Insights

If you have recently applied for a credit card or a personal loan, etc. then you probably know about the importance of CIBIL rating. Having a good credit score is extremely important to get an affordable loan deal, let along getting one in the first place. If your score is not up to the mark then you can make it better by understanding how the scoring works. In other words- by learning about the credit score insights you can take appropriate changes to make yours better.

The following are some of the basics of the common credit scoring methods that you can apply for an easy bad credit fix:

1. History of Settled Accounts

It's unfortunate that so many people mistake "settled" loan accounts for truly "settled". However, it's not their fault, for the word is certainly misleading.

Banks "settle" home loan or personal loan accounts when the borrower is unable or not willing to repay the loan as per the set terms. In this, the bank offers to cut a certain portion of the remaining debt so that the borrower can repay a smaller amount instead. However, in doing do the loan account is closed and the borrower is free. However, truth is that this incident reflects poorly on the borrower and is mentioned in their credit report too. So, if you have a history of a "settled" loan account, then your CIBIL rating is going to be poor as well.

2. Age of Bank, Credit Card and Loan accounts

You know what has the biggest impact on your CIBIL rating? The age of your bank accounts and credit card accounts, etc. This is because the greater a person has experience with money management; the easier it is to trust them with lent money.

If you want to achieve a high CIBIL rating, then it's imperative that you keep your oldest bank accounts open. You can close any new accounts if need be, but the old accounts that reflect responsible credit behaviour must be kept open for as long as possible.

3. Repayment History

Are you often late when paying credit card bills or loan Equated Monthly Instalments (EMIs)? Or do you try to stick to the due dates? Most of the credit rating agencies give a high rating to those who are regular with their payments. In fact, sometimes you can lose credibility by missing a single loan EMI.

So, if you want to avoid seeing a day when you have to start looking for a bad credit fix, then it's best if you can make the necessary payments on time. You can make this easier by asking your bank to auto-debit your EMIs or the credit card payments.

4. Credit Variation

So, you pride yourself on paying your personal loan EMIs on time and after several months you obtain your CIBIL report expecting a high score. However, you are met with disappointment. But why?

Many people work hard towards improving their CIBIL rating but are surprised when they don't get the desired results because of confining their focus on just one form of credit.

You can’t achieve a high score if your credit report shows only an account of a personal loan, or a credit card, or a car loan, etc. On the other hand, if it presents a history of varying credit forms such as credit cards, mortgages, personal loans, etc. then you can easily earn a high credit score.

5. Credit Report Mistakes

Errors in your credit report, whether because of you or the credit rating bureau itself, can damage your score. Examples include wrong name or address, incorrect repayment details of a loan account, mismatching of information, etc.

To score a high credit rating it's important that you check your credit report from time to time. That's the best way to detect mistakes and have them corrected. Besides, most of the credit bureaus offer the option of easily raising such complaints through their websites.

Understanding how credit scores are calculated isn't that complicated. While the method and formulas of one credit bureau may differ from another, the fundamentals are universal. So, be sure to apply the information learnt from the insights above and you can achieve a high score for sure.


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