Read: What is cibil report
Let us understand the meaning of credit Score?
A credit score is a parameter that depicts your credit worthiness. It is primarily based on different factors like Timely Payments, Financial Transactions, Cheque Honours etc. It is important for any financial institution to check the credit score of the customer before issuing or lending any type of loan and this can be done through Credit scores (for e.g. CIBIL Scores), which maintains the credit worthiness of the customers in terms of scoring patterns.
RBI has also mandated all the banks to ensure a Credit Check from a credit bureau before issuing any type of loan to the customer
It is extremely important to note that improving your Credit Score is a gradual process. In the case of bad credit scores – it is fairly important to have patience along with righteous financial activities to be imbibed by you. Below are few of them.
- Keep a check on your Credit Score: It is advisable to be abreast of your credit score in terms of fetching your reports from the Credit Bureau like CIBIL, Equifax etc. This will give you a clear idea about your financial actions, anything beyond 700 points is considered to be a good credit score, below that would need continuous improvements
- On Time Payments: Make your payments on time irrespective of the mode you choose. It is fairly important that any payment instrument gets honored and should be cleared in favor of intended beneficiaries. It is also important that you make your EMI payments on time
- Use your Credit Limits diligently – Highers credit limits are always tempting, therefore it is important to use as per your payment capacities on time. There is an important saying “Chew what you can swallow”.
- Your credit profile should have a right mix of Secured and Unsecured Loans. It’s important that you should not be thoroughly dependent on your credit cards or personal loans, your Credit Scores will reflect really well if there is a right mix of both Secured and Unsecured loans. For e.g. a mix of Home Loans, Credit Cards etc.This works best with Pareto effect where in your credit should consist of 80% of Secured and 20% of Unsecured LoansCheck your eligibility here: Financial tools to calculate Home Loan emi, Personal Loan emi etc
- Above all avoid taking credit as much as you can: A higher number of inquiries with the respective financial institutions will end up having lots of credit pulls and this will end up affecting your credit scores negatively. This will further reduce your chances of getting the better interest rates for your future loans So be careful on your credit scores – for more info, please visit www.mymoneykarma.com