All You Need to Know about Credit Score/https://mortgageloancreditcardinsuranceinvestmentoffer.in/

 

A bank or Non-Banking Financial Company (NBFC) or an online lender for a loan or a credit card may become unavoidable for everyone at some time in time for various purposes. It could be for a business loan, credit card, loan for education, wedding, financial emergency, home loan, etc. When you apply for a loan, the lender pulls your credit score and report to see your past credit activities whether you are an eligible borrower. The three-digit credit score plays an important role in getting you the credit you want at better rates.which ranges between 300 to 900.

What is a credit score?

The popular definition of a credit score is as such “A credit score is a statistical number that evaluates a consumer's creditworthiness and is based on credit history. Lenders use credit scores to evaluate the probability that an individual will repay his or her debts.

 

Why important is a credit score?

 we explore this section answer this simple question - “Will you lend money to a complete stranger?” Most of you will be nodding your head saying “No”. The only way you will think of owing money to a stranger if you know the person or one you know vouches for them.

How and where can you check your free credit score?

Checking your credit score frequently helps you take smart financial decisions. Based on the score, you can approach a bank to apply for a loan or credit card and bargain for better terms. Even a small reduction in the interest rate of big-ticket loans can save you a lot of money in the long run. You may wonder how and where you can do the free credit score check. Following are the ways to check your credit score at various platforms.

Credit Bureaus: As per the RBI mandate, each credit bureau should give your credit report and score for free once a year. You can check it online at their official website or by mailing them.

Third-Party Financial Portals: Third party financial sites provide credit score for free round the year. You can check it anytime from anywhere and it’s completely free. Checking your credit score does not hurt it, and you can check it for any number of times.

Banks: These days some of the banks also provide credit score. Some lenders charge a fee while some provide it for free.

What Information Needed to Check  Credit Score?

Checking your credit score for free is easy and it will require certain information to fetch your score. Following are the information that are generally needed to check your credit score at third-party financial websites.

•             Name: The name should be your original name which is recorded in your PAN and other official copies such as Voter ID, Passport, Birth Certificate, etc.

•             Date of Birth: The date of birth is mandatory to check your free credit score. This should match with the birth detail on your PAN and other official records.

•             PAN: This is the most important proof that is required to fetch your credit score from the bureau. You need to just enter your Permanent Account Number to get it.

•             Gender: You may have to mention which gender you belong.

•             Mobile Number: You need to mention your mobile in order to verify your profile. An OTP will be sent to your mobile for verification.

•             Employment Details: Information such as your employer, monthly salary and type of employment may be required to get your credit score.

How can you maintain a good credit score ?

Maintaining a good credit score can be done easily by doing the following:

1. Pay your bills on time

Regular and on time bill payment has the highest weightage when calculating your credit score. So always pay your credit card bill or loan EMI on time. Make sure you have set up an alert to remind you about payments or opt for automatic payment where the lender withdraws the money owed on the day already decided by you.

2. Keep your credit utilization low

Keep your overall credit utilization low, i.e. say you have 2 credit cards which have Rs. 50,000 and Rs.40,000 as their respective credit limits which adds up to a total credit limit of Rs.90,000. The recommended credit utilization ratio is 30% i.e. Rs. 27,000. If a person keeps using a lot of credit especially maxing out their credit limit will negatively affect their credit score.

3. Monitor your credit report regularly

Check your credit report on a regular basis. RBI has mandated that all credit bureaus provide one free credit report each year to customers. But we suggest that you have a look at your credit report at least twice each year.

This is important because there could be mistakes on your report. Th mistakes could occur if the lender makes a mistake or due to identity theft or credit card fraud, which could bring down your credit score.

Benefits of Having Good Credit Score

Having a good credit score can help you secure loans and credit cards with ease. Lenders prefer applicants with good credit score as they show positive track record of repayments. Following are some of the benefits of having a good credit score.

•             Low interest rates on loans: Individuals with a good credit score can secure any type of loans with a good rate of interest. This is a bonus for having a good credit score. A high interest rate loan can pinch your pocket and become a burdensome in the long run.

•             Greater chances of loan and credit card approval: As the good credit score is a representation of good financial habits, the lenders are no more reluctant to grant more credit to individuals with a good credit score.

•             Higher limits on credit cards: The good credit score can make you eligible for higher credit card limits. Higher limits can help keep your credit utilisation ratio low and thus improve your score further.

 

What are that factors that can impact your credit score negatively?

 

Following are the reasons why most people may have poor credit score.

1: Late Repayments

You must remember that even one or two delayed credit card bill or loan repayments can affect credit score negatively. The more the number of delayed payments, the greater is the negative impact on your credit history and credit score. Though you may repay the amount later with a penalty to the lender, it gets reported by the lender as delayed payment to the credit bureaus.

2: Missed payments

As major chunk of weightage in credit score calculation depends on repayment history, hence it is vital you do not miss a single payment on your credit card or loan EMI. Even a single default can hurt your credit score, making it difficult to avail credit in the future.

3: Poor Credit Card Utilisation

Maxing out credit card limit implies you are credit hungry which could impact your credit score negatively. Experts recommend that having a credit utilisation ratio of 30% and below is good for your credit score. In case you use your credit card often, you can request for a higher credit limit on your credit card or get another card to balance the credit utilisation ratio.

4: Multiple Loan Applications

As we already know that a hard enquiry can negatively impact your credit score, you must keep tabs on your loan applications. Applying for the same loan with multiple lenders can work against you as multiple enquiries are made. Hence, apply with the lender only where the approval chances are higher. You can check your eligibility for free for all loans on financial portal like CreditMantri which can avoid a potential rejection.

Foreclosure: It happens in secured loans, wherein the lender sells the property through auctions and retrieve the outstanding loan amount. It can significantly reduce your credit score.

Written-off: The lender writes off your loan or credit card account if you have continuously defaulted on repayments for 180 days. This gets reported to the credit bureaus by the lender, and your credit report shows written-off status. This can affect your credit score negatively and make you ineligible to avail loans.

Settled: When you are unable to repay the loan, the lender allows you to settle the loan account for a mutually agreed amount which would be lower than the outstanding loan amount. This is a negative issue which will impact your credit score negatively.