16-Mar-2019 written by : FSI-Team
You applied for your first loan at the bank, and it got rejected. You are told that your credit score isn't high enough. So, you panic and become overwhelmed by the entire concept of credit score. Well, you needn’t worry as you aren’t the only one to face a problem like this. Hundreds of thousands of people across the country learn about credit score every next day.
The subject of credit score is extremely important, at least as far as your finances are concerned. However, understanding what it’s all about and how it works isn’t as difficult as you think. To help you get started, we share some of the key points that you must know:
If you think that you will need a high score to get personal loans, home loans, etc. then you will be surprised to know that its impact isn’t limited to the financial arena only. For instance, the banks and other financial institutions can check your credit report if you apply for jobs in these institutes. Similarly, a poor score can hurt your emotional and mental health and cause other serious health issues.
As per the new RBI norms, all credit rating agencies including Cibil have to offer at least one free credit report to their users every year. So, if you haven’t checked your credit report in the current year yet, then you can get it for it.
If your score is below average, then you needn’t worry. There are a number of things that you can do to increase it easily. Some of the most recommended ones include the following:
The most important thing that you need to remember when you are working to increase your score is that you must never delay the EMIs of your personal loans, home loans, etc. as well as the payments of credit card bills. This is because your credit report contains the history of all these payments. If there are any instances of late or missed payments, then your score can be hurt easily.
When used responsibly, credit cards can make your life easier and help increase your score too. However, if you are fond of using your cards for luxuries that you can’t otherwise afford, then it’s possible for your credit utilization to become too high. This can be a big problem when you want to increase your score.
Ideally, your credit utilization should never be above 30%. So, if your credit card has a limit of Rs. 1 lakh, then you should not spend more than Rs. 30,000 a month using the card.
It’s highly recommended that you get your free cibil report as soon as possible, and when you do, check all sections including your personal details, financial details, credit history, loan inquiries, etc. If you notice any typos in your name, address, etc. or wrong information about your credit history, bank accounts, etc. then you must inform your bank immediately. These mistakes when left unchecked can harm your score even when it’s not your fault.
Your score can be ruined even when you are not in control. For instance, if you become a loan guarantor for someone, then you take the responsibility for their repayment. If the person refuses to repay the loan down the road, then your own score can be greatly affected. The same can happen when you take a joint loan. So, always be careful when making decisions like these.
As you can see, credit score management isn’t as challenging as many people think. All you have to do is develop good financial habits and take some responsibility for your actions. However, if your situation is more complicated than others and you need financial aid on an urgent basis, then you can also contact a professional like Credit Sudhaar which has a team of highly skilled and experienced finance gurus. Good luck!