Sunday , 25 June 2017

Ways to Improve your Credit Score

A CREDIT SCORE is a measure of how diligently you make payments relevant to loans, credit cards, telephone bills, insurance premiums, rent cheques and so on.

Credit Information Bureau (India) Limited (CIBIL), which collects your credit information from banks will soon be keeping your credit scores on the basis of your bill payments too. CIBIL scores will range between 300 and 900, and a number of the above aspects will go into making that score. However, the most significant of these are repayment of loans and credit cards – these factors will determine your loan eligibility and whether a loan can be granted to you in the first place or not.

Considering the important role your credit report plays in your financial life especially with relevance to loan borrowing and establishing credit worth, it’s time you put some thought into how best you can make your credit report work to your advantage.

Here are list of things you keep your credit score up and above any kind of default:
1. Ensure you get your own copy of the credit report, at least on an annual basis
- Subject your credit report to a thorough scrutiny.
- If you have nagging questions about any data, follow it
- up with CIBIL or the credit agency who has collated the data on the credit report.
- Any discrepancies or pending defaults that has
- already been cleared must be immediately corrected or updated to ensure your credit score is not affected.

2. How do you correct discrepancies?
- Take up the issue with the bank in question first. For instance, if a debt has already been paid off and but the report doesn’t show so. Call the bank and ask them to update with immediate effect.
- The bank will then update the- credit agency regarding the status and all is well. This approach is less time consuming and far better than directly contacting the credit agency.

What if the bank does not oblige to make the changes…
- Take up the matter with the credit agency and the banking ombudsman. However, first, wait for a period of 1 month for your bank to take corrective action.
- Act quickly and follow up with the concerned credit agency and the bank. Keep a record of when you have filed a complaint or sought clarification.

3. Put a priority check for your bill payments
Whether they are loans, credit card payments or insurance premiums — every payment counts. If you need to be reminded about your payment, set up an automated system with your bank to get it cleared within the due date. It is a sure shot way to improve your credit score.

4. Try using your credit cards the smart way
Use your credit card! It serves as an excellent tool to boost a good credit score if utilised properly. However, the trick is to avoid making late payments. Things like not stretching it too close to your credit limit, regular use of the card but timely payments upfront is proof of how you manage credit lent in the short-term.

5. Net worth is key
Your credit report is based on the flow of credit and debt. Here, the ratio between these two factors is directly related to your credit score average. For instance, if you have several outstanding debts, and even if you pay them on time it would still affect your credit score.
Hence try and pay off as much debt as possible and keep them to a minimum before taking a fresh debt or loan.

Track your credit score!

Often people opt for loans due to its ready availability without giving thought to their other financial commitments. Also, they fail to account for an emergency fund and a savings plan. This could fall into perspective once a summary of a person’s credit repayment is available in a single log.

Have you been paying your telephone bills on time? Do you consistently forget the due date for your insurance premiums? You better watch it! If you ever intend to apply for a loan in future all these aspects are going to count! These are a few of the spruce up elements planned to be implemented in your current credit reports. What’s more there will be a system in place through which you can have access to your credit reports!

Such spruce ups have been made possible through a recent move of the RBI (Reserve Bank of India), which has granted an `in principle’ approval for the registration of CIBIL and a few other credit agencies namely, Equifax, Experian and Highmark under CIC Act (Credit Information Companies (Regulation) Act.

Why a credit report?

The concept of credit reports came into existence to ramp up the credit system and ensure banks have an evaluation system in place to decide if a prospective borrower is credit worthy enough to lend huge sums of money to, in the form of a home loan, car loan, personal loan etc. Once the RBI approval comes into effect formally, more credit information on individuals can be accessed, which includes telephone bill payments, insurance premiums etc. This should provide a well rounded study of how an individual manages finances, how they repay their debts, how timely they are with their bill payments etc.

Access to credit reports – Advantages

There are several advantages to the enhancements set to happen with the existing credit information system. Here are a few of them.

Prevents Identity theft

If an individual’s credit card or bank account is being misused, keeping track of one’s credit report will help the individual take corrective action before it comes too late or before debts start mounting to unreasonable levels. It can help prevent identity theft and instances of fraudulent transactions to a large extent.

Creates discipline and improves money management skills

Often people opt for loans due to its ready availability without giving thought to their current lifestyle, other commitments and debt liabilities. Also, they fail to account for an emergency fund and a savings plan. All these could fall into perspective once a summary of a person’s credit repayment is available in a single log with a score spanning 300-900 points providing a measure of an individual’s creditworthiness.

More comprehensive credit reports

RBI’s “in principle” approval is the first step towards more comprehensive credit reports, where more periodic transactions involving money inflow and outflow can be tracked to analyze if an individual adopts a careful and methodical approach to his finances and eventually serve as a financial goal map for an individual who wishes to improve his credit score.

The proof of the pudding is in the eating

The very fact that individuals will soon have access to their credit reports can come as a sigh of relief to loan applicants. If they have a very good repayment track record and an excellent credit score their chances for bargaining for a better interest rate on the basis of their credit report is a viable option. It would also help banks significantly decrease the percentage of defaults by opting to choose a better customer for a more competitive interest rate. After all it makes better business sense for banks to have a higher percentage of customers who repay on time, every time, at lower interest rates compared to a higher percentage of defaulters with high interest rates.

More credit agency options

Now that they are more credit agencies to choose from, better systems that weed out errors and streamline the existing information systems will be given high priority. Establishing a reputation for being the most accurate credit agency will provide the impetus for credit agencies to overcome the several bottlenecks that will emerge in setting up the infrastructure and the actual process.

Knowledge is power

Access to credit reports is wonderful news for individuals who wish to apply for a loan but are unable to get one due to a faulty credit report or missing information. Currently, rejected applicants who have been informed by their banks that CIBIL reports were the reason, would need to request for the control number of their credit report from their bank and approach CIBIL for a clarification. This can be a complicated process, especially if the bank does not provide a valid reason for the reject. With direct access to their credit reports, individuals can directly contact CIBIL for a clarification or correction, even before they approach a bank for a loan. Verification and correction of credit scores can be far easier with such transparency.

The flip side

Such intensive credit tracking systems can also stir up a new set of problems to deal with. More often than not technology would play a key role in setting up systems that can source huge volumes of information of a large number of individuals. Credit information is also very sensitive and personal to an individual, which in the wrong hands could prove dangerous. So credit information sourcing could be a new addition to the number of tracking systems that are slowly but surely evolving in all spheres of our lives. In light of such developments could breach of privacy be one of they key issues we would need to battle in the future?

The top 7 things to do with your credit report

Maintain and use your credit card. It serves as an excellent tool to boost a good credit score if utilised properly. However, the trick is to use it well and avoid making late payments. Things like not stretching it too close to your credit limit, regular use of the card but timely payments upfront is proof of how you manage credit lent in the short term. This will lay the foundation or provide a sample of how capable you are in managing loans long term, hence this can prove to be an asset to your credit score and help in improving your credit score.

Yes, its official now! You will be able to access your credit scores in December 2009. The score will range between 300-900, indicating the levels of default and will be available to consumers for a sum not exceeding Rs.100 as prescribed by the RBI. CIBIL, which already has a huge database of credit reports, which are currently consulted by banks before sanctioning a loan is putting up the infrastructure to be ready to service consumers who wish to access their credit reports. Isn’t that great news? Now, many of you maybe wondering how your credit report will look like, how to go about setting any mistakes in the report right, how to maximise the benefits of being able to access your credit score and other such issues. Well, look no further. Listed below are the top seven things you ought to do with your credit report.

#1 GET A COPY OF YOUR CREDIT SCORE EVERY YEAR FOR AN ANNUAL REVIEW

You should study the credit report carefully for any hidden flaws or misinterpretations. If you find anything that you feel requires a second check, do it and if still you are convinced it is indeed a flaw, then you need to address the concern immediately and escalate the issue.

# 2 TAKE UP ISSUES THROUGH THE FASTER ROUTE

You need to take up issues in your credit report with the bank in question first, if for instance its a debt situation, which has already been paid and is still being recorded as a debt. The bank will then update the credit agency regarding the status and all is well. This approach is less time consuming and far better than directly contacting the credit agency. If in case the bank does not oblige you can take up the matter with the credit agency and the banking ombudsman after waiting for a period of a month, which is the standard waiting period you must provide to the bank to take necessary action.

# 3 PAY YOUR BILLS ON TIME

Whether they are loans, credit card payments, insurance premiums every payment counts. If you have hassles remembering payments consider setting up an automated system with your bank to get it cleared within the due date. It is sure shot way to improve your credit score.

# 4 KEEP THAT CREDIT CARD AND USE IT JUDICIOUSLY

Maintain and use your credit card. It serves as an excellent tool to boost a good credit score if utilised properly. However, the trick is to use it well and avoid making late payments. Things like not stretching it too close to your credit limit, regular use of the card but timely payments upfront is proof of how you manage credit lent in the short term. This will lay the foundation or provide a sample of how capable you are in managing loans long term, hence this can prove to be an asset to your credit score and help in improving your credit score.

#5 CREDIT TO DEBIT RATIO IS THE KEY FACTOR

As with all logic based reports, your credit report is based on the flow of credit and debt. Here the ratio between these two factors is directly related to your credit score average. For instance, if u have several outstanding debts, even if you pay them on time it would still affect your credit score as your total net worth goes down. Hence try and pay off as much debt as possible and keep them to a minimum before taking a fresh debt or loan.

#6 DO NOT CLOSE YOUR CREDIT CARDS

In line with the same credit to debit ratio aspect, closing down your credit card may not help the score. Even if you do not use the credit card, it would still make sense not to to close it. If you have concerns and must absolutely close it, you may choose to do so but be aware that this also has a say in your credit score.

#7 QUICKLY ACT UPON ISSUES IN THE CREDIT REPORT

Dispute a bad credit botch always, don’t sit back and let it remain. Try solving the issue by contacting the bank and the credit bureau. If your concerns are taking time to be addressed, credit report systems that are still evolving in India might soon discover at least temporary solutions to the issue like bookmarking the issue as something under the scanner. This will protect you from being evaluated on the basis of a faulty issue in the credit report. This may help you have enough time to resolve the issue with supporting evidence regarding any false debt situations.

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