How To Avoid Mistakes On Your Credit Report

We have developed eight effective strategies for preventing mistakes on your credit report. We wish you much success.

1) Beware Of Debts & Credit You Don’t Use

Just as it is very easy to apply for a store credit card, it is also easy to forget you have it. It is important to remember that the account will remain on your report and affect your score as long as it is open. Don’t make the mistake of having credit lines and cards you don’t need. It makes you look more risky from a lenders point of view.

Also, having many accounts you don’t use increases the odds that you will forget about an old account and stop making payments on it, resulting in a lowered credit score. Keep only the accounts you use regularly and consider closing your other accounts. Having fewer accounts will make it easier for you to keep track of your debts and will increase the chances of you having a good credit score.

However, realize that when you close an account, the record of the closed account remains on your credit report and can affect your credit score for some time. In fact, closing unused credit accounts may actually cause your credit score to drop in the short-term, as you will have higher credit balances spread out over a smaller overall credit account base.

For example, if your unused credit limits amount to $2,000, and your regularly used accounts also have a credit limit of $2,000, you have $4,000 of available credit. If you close your unused accounts and owe $1,000 on the accounts you use regularly, you have gone from using one-fourth of your credit ($1,000 owed on a possible $4,000) to using one-half of your credit ($1,000 from a possible $2,000). This will actually cause your credit risk rating to drop. In the long term, though, not having extra temptation to charge, and not having credit you don’t need will help you budget.

2) Avoid Having Many Credit Report Inquiries

An inquiry is noted every time someone looks at your credit report. Don’t make the mistake of allowing too many inquiries on your credit report, as it may appear that you have been rejected by multiple lenders. This means that you should be careful about who looks at it. If you are shopping for a loan (finding the lowest interest rate based on your credit), shop around within a short period of time, as inquiries made within a few days of each other will generally be lumped together and counted as one inquiry.

You can also cut down the number of inquiries on your account by approaching lenders you have already researched and are interested in doing business with. By researching first, and approaching second, you will likely have only a few lenders accessing your credit report at the same time, which can help save your credit score.

3) Don’t Mistakenly Over-Use Online Loan Rate Comparisons

Online loan rate quotes are easy to obtain. Just type in some personal information and within seconds you can receive a quote on your car loan, personal loan, student loan, or mortgage. This is free and convenient, leading many people to compare several companies at once in order to get the best possible loan rate. The problem is that since online quotes are a fairly recent phenomenon, credit bureaus count each quote as an inquiry. This means that if you compare too many companies online, your credit score will suffer.

This does not mean you shouldn’t seek online quotes for loan. In fact, online loan quotes are a great resource that can help you get the very best rates on your next loan. It just means that you should carefully research companies and narrow down your choices to only a few lenders before making inquiries. This will help ensure that the number of inquires on your credit report is small, and your score will remain strong.

4) Don’t Make The Mistake Of Thinking You Only Have One Credit Report

Most people mistakenly speak of having a “credit score” when in fact credit reports often include three or more credit scores. There are three major credit bureaus in the United States that develop credit reports and calculate credit scores, as well as a number of smaller credit bureau companies. In addition, some larger lenders calculate their own credit risk score based on information in your credit report. When improving your credit report, you should not focus on one number. You should contact the three major credit bureaus and work on improving all three credit scores.

5) Don’t Close Multiple Credit Accounts

Many people make the mistake of closing multiple credit accounts in an effort to improve their credit score. If you close an account you need (for example, if you close all your credit card accounts), then you may find yourself in the position where you need to reapply for credit. Not only is this inconvenient, but the inquiries from credit companies can actually hurt your credit report. Additionally, credit bureaus will actually look favorably upon your credit report if they can see that you have a (good) long-term credit history. For example, don’t make the mistake of closing a credit card account you have had for the past 10 years, as this may actually hurt your credit report.

lf you have credit accounts that you don’t use, or if you have too many credit lines, then by all means pay off some and close them. Doing so may help your credit score, as long as you don’t close long-term accounts you need. In general, close your newest accounts first, and only when you are certain you will not need that credit in the near future.

Closing your accounts is a bad idea if:

A) You will be applying for a loan soon. The closing of your accounts will make your score drop in the short-term and will not allow you to qualify for good loan rates.

B) Your debt to credit ratio increases. For example, you owe $10,000 now and have access to an extra $5,000. However, after closing some accounts you are only left with $1,000. This brings you closer to maxing out your credit and in turn hurts your report.

6) Don’t Assume Only One Action Will Improve Your Credit Report

An example of a common mistake that some debtors make is believing that paying off a credit card bill will boost their score by 50 points, while closing an unused credit account will result in 20 more points. Improving your credit report is certainly not this simple. How much any one action will affect your credit score is impossible to gauge. It will depend on multiple factors, including your current credit score, and which credit bureau is calculating it. In general, the higher your credit score, the more small factors – such as one unpaid bill – will affect you. When repairing the score on your credit report, you should not equate specific credit repair actions with numbers. The idea is to do as many things as you can to improve your credit report.

7) Having No Loans & No Debt Will Not Improve Your Credit Report

Some people make the mistake of believing that owing no money, having no credit cards, and avoiding the whole world of credit will help improve the score on their credit report. In reality, the opposite is true. Lenders want to know about your past ability to handle credit, and the only way they can tell is by the score on your credit report. Having no credit at all can actually be worse for your credit score than having a few credit accounts that you pay off on time. If you currently have no credit accounts at all, opening a low balance credit card can actually boost your credit score.

Think of your credit report like a basketball game. The player who scores many points in every game is considered to be a great player, and will receive higher financial rewards than those who only score a few points. Those who don’t even play basketball have no scores to “report” to the game officials. In the world of credit reports, the debtor who scores the most points is someone who pays off their credit accounts every month. They will receive financial rewards through easier access to loans and lower interest rates, while those who have no credit accounts have a very low credit score.

8) Never Do Anything Illegal To Repair Your Credit Report

It seems pretty obvious, but plenty of people make the mistake of lying about their credit score or even falsifying their loan applications because they are ashamed of a bad score. Not only is this illegal, but it is also completely ineffective at repairing your credit report. Your credit score is easy to check and, not only will you not fool lenders by lying on your credit report, but you may actually face legal action as a result of your dishonesty.

Debt Consolidation Loans VS Credit Counseling

Debt consolidation and credit counseling are great options to get out of debt. However, they are oftentimes confused with each other. You need to determine which debt relief is the correct one for you. Any of the two will help you achieve debt relief but a careful analyzation of your finances will determine which option should be followed.

In truth, debt consolidation is a very broad debt relief term. It refers to combining all your debts into one manageable payment. People who have very little or no understanding of the debt relief concept usually think that this means getting a big loan to cover for the other debts. They immediately jump to conclusion that this is the only way to go. While it is a legitimate debt relief option specifically known as a debt consolidation loan, there are other forms of debt consolidation – something that can be identified as credit counseling or debt management.

In essence, credit counseling is a form of debt consolidation because that is exactly what it does – consolidate your payments and manage it for you. If you are enrolled with a credit counseling program, you are required to send payments to a third-party company who will distribute those funds accordingly for you.

For the sake of having specific comparative points, let us concentrate on debt consolidation loans and credit counseling.

Both of these debt relief options will require a steady income. Debt consolidation loans are not possible without it – as the lender will be very concerned about how you will pay them back. For credit counseling, no counselor will assist you without it. You can probably get advice but it will be for nothing if you have to means to support the payment plan that you will both create.

That is as far as the similarities go for these two debt relief options. The differences lie in the details of the debt relief process.

Credit counseling or debt management companies are oftentimes affiliated with creditors. They put up these non-profit agencies because they want to minimize losses by giving free help and credit advice to those who find it hard to make payments. That might seem like they are biased but if you are in dire need of help – free professional advice will sound really good for now.

Debt consolidation does not necessarily have to involve a company that is connected with creditors. In fact, when you are taking out a loan, you don’t necessarily have to indicate that it will be used to pay off your debts. The only concern of the lender is proving that you can afford to pay off your loan.

Another difference is with credit counseling, you don’t have to possess a good credit score. If you have the means to pay for the monthly requirements that will be imposed on the debt management plan, you should be fine. With debt consolidation, a good score will allow you to maximize the benefits of acquiring a loan to pay your other debts. You can get loans with the best interest rates – that means lower rates with ideal payment terms. A bad credit standing can cost you a lot through high interest rates or you may have to put up a collateral to get a secured loan.

The presence of credit counselors can also provide you with expert financial advice to aid you in overcoming your mounting debts. A debt consolidation loan does not necessarily have that. The latter is usually a DIY type of debt relief plan. The advice is not the only thing lacking. A credit counselor can ensure that you are continually paying for your dues. In debt consolidation, you are on your own. If you have the discipline to keep on paying, this should not be a problem. So if you believe that spending and payment discipline is not one of your strongest points, then it is best to opt for the service of a credit counselor.

Ultimately, your choice of debt relief will depend on what your finances can allow you to take. Make sure to begin with a clear and complete analysis of your current financial standing. Getting debt relief through an option that you cannot afford will only end up putting you deeper into debt.

Understanding Car Financing

When you want to purchase a car, one of the main considerations is financing. This is because many people do not have the initial high amounts of money, which are required to meet the cost of the car. One thing you should note about Car financing is that it is very hard to quantify, it is determined by many other factors such as the type of car that you want to purchase, the price tag and the possibility of a trade-in. All these mean that you will be offered different finance packages by different organizations, and it is your duty to choose the most appropriate one.

The best way to approach car financing

With all the factors involved, Car financing becomes a very complicated issue, which needs proper understanding of the financial world. Since most of us do not posses such skills or information, the best approach would be to involve the services of a car finance broker. The broker will assist you in all the areas associated with car financing. Remember car financing, just as any other form of financing will require various paperwork. In most cases, people are already overwhelmed by their daily lives, it is therefore better to leave the broker to fulfill the formalities helping you secure the loan.

Some people obviously benefit more than others do from this arrangement. One of the groups that will benefit mostly from the services of a car-financing broker is those who are self-employed. This is because most of them cannot produce satisfactory historical profit figures to satisfy the financial provider. The duty of the broker is therefore to find institutions, which are more likely to offer better terms. The broker is also going to help you negotiate for better terms just like those offered to people who provide sufficient history of profitable trading.

Since car financing brokers deal in only one type of financial product, they have a clear understanding regarding the product. They also use specialized tools such as car loan calculators, which will help you, understand the long-term effects of the loan that you take. Remember a loan might seem cheap now but present adverse effects later on. You will therefore enjoy more piece of mind depending on the advice provided by such specialists.

Apart from using the services of a broker, you can also source your car financing online. This method presents you with various banking institutions to source your financing from. In order to exploit this dimension fully, you need to have a clear understanding of what sort of deal you are getting into. Luckily, there are certain tools, which you can utilize to help you gain a deeper understanding of the loan you are acquiring. They include:

• Car finance calculator- this will help you get a clear picture of what you will be paying every month. It will also help you understand how long it will take before you can repay the loan.

• Chattel mortgage calculator- you can also utilize this calculator, which acts the same as the car finance calculator but on terms, attached to chattel mortgages rather than general loans.

Debt Settlement in the Peach State

As economic difficulties around the country continue to worsen, tens of thousands of Florida consumers have reported problems with credit card accounts and bills they cannot easily pay. Unfortunately, many of these same borrowers have been led to believe that bankruptcy is their only solution to seemingly intractable debt loads, and, particularly for those Florida heads of households who have staved off external help as long as possible hoping that they could repay their debts through ordinary means, the new alternatives toward bankruptcy such as debt settlement remain unknown to the people that could best take advantage of these programs. Much as Chapter 7 debt elimination bankruptcy does still maintain some advantage for a certain sort of consumer – consumers with minimal earnings and no assets (including household furnishings) to speak of, more exactly – a host of options currently awaits the borrower who’ll spend the necessary hours researching these new strategies. Make no mistake, all Florida residents with the capacity to repay their obligations without unduly taxing their household budget should attempt to satisfy their various accounts by traditional measures. However, with the economy of Florida and the nation as a whole so tenuous at this very moment, it behooves the considerate borrower to look at every strategy and pay special attention to the debt settlement solution.

Thanks to their onslaught of television and newspaper advertisements around Florida, Consumer Credit Counseling remains the most well known of all of the debt relief alternatives, and, indeed, the program does boast lower interest rates and substantially lower payments for those Floridians who’ve signed on for their services. Still, much as the Consumer Credit Counseling programs may alleviate many of the tensions that follow from lender harassments (and their accompanying collection agencies), reduced payments and simplified statements still do not equal debt liquidation. The Consumer Credit Counseling companies’ solution only helps aid their Floridian clients suffer through their bills in the short term while the actual debt is just put aside for a later date. There will be no hope of the balance liquidation offered through Chapter 7 bankruptcy protection, and, for that matter, entrance to the Consumer Credit Counseling program also threatens other alternatives such as debt settlement since the borrower essentially admits that they could attempt to satisfy the balances on their own. Given the dramatic shifts of costs of living that exist around differing parts of Florida, Consumer Credit Counseling should be very cautiously approached. It may still be a more beneficial alternative when compared to Chapter 7 or Chapter 13 bankruptcy, depending upon the individual Florida household’s specific desires and capacities, but there’s yet every reason to look at the other possibilities now at hand.

Debt settlement, while a somewhat innovative method of satisfying unsecured loans that Florida borrowers would otherwise be unable to repay, has been around for a number of years. Through negotiation with the lenders, experienced and certified debt settlement counselors attempt – successfully, almost always, for those borrowers that the settlement companies agree to work with – to argue for a significant reduction of existing balances. The process is both legal and justifiable. Indeed, since debt settlement essentially requires the repayment of some part of the loans, Florida borrowers should consider debt settlement more ethical than the Chapter 7 debt elimination program. In the best of all possible worlds, consumers would simply be able to reduce household expenses or raise their gross income so as to pay back their lenders month by month. Alas, in these lean times (with every Florida employment market from Jacksonville to Miami dropping jobs by the bucket load), even the most conscientious borrower may need some professional assistance, and there are certainly smoother roads toward unsecured debt liquidation than bankruptcy. Once again, much as debt settlement may not seem as familiar to ordinary Florida consumers, it’s most certainly worth any debtor’s time to investigate the option.

Within debt settlement (as with Consumer Credit Counseling or Chapter 13 bankruptcy protection), there will be a schedule of repayment that asks each Florida borrower involved with the program to send their money directly to the settlement company on time each month. When first talking to the counselors, this is one of the important initial questions that Florida consumers must ask: how long will the debt settlement process take? In general terms, the professional will guarantee a schedule of no longer than five years for the settlement process in order to prime the credit card representatives for balance reductions. However, should the borrowers not demonstrate enough household income (also taking into account their other debts untouched by settlement plus whatever costs of living expenses in their area of Florida) to be able to satisfy the remaining amounts within sixty months, the debt settlement company may not be able to take them on as clients. Remember, payments must be low enough that the borrowers – with some degree of deprivation to be expected; remember, the point of debt settlement is to erase all credit card bills and similar obligations – could still maintain their household while attempting to estimate the family budget for Florida in the seasons to come. If the debt settlement company does not truly believe that the borrowers would not be able to fulfill their monthly stipend through the settlement process, they will have no choice but to deny the borrowers’ entreaties. This is yet another difference between debt settlement and Consumer Credit Counseling: CCC companies never refuse a client and have no problem whatsoever letting those clients continue along with low monthly payments (and ever accruing interest) for years and years to come.

In Florida, there is far less potential for damage to recalcitrant consumers compared to their brethren around the country. Florida’s debtor laws guarantee residents a number of liberties surrounding over due accounts which most Americans suffering through such tribulations would dearly wish to enjoy. Much as every state has their own laws preventing creditors and collection agents from unfair harassment of borrowers, Florida specifically forbids lenders from any communiqués with their clients once a Florida resident signs a “cease and desist” notice and mails the notice to the appropriate parties. Even beyond the automatic stay granted those consumers filing for bankruptcy or the leverage that an attorney may grant, merely providing formal notification of the desire to avoid correspondence or communication with the creditors will mean that Floridians are legally protected. Furthermore, the state of Florida has enacted statutes which – for the most part – utterly vouchsafe the home and the wages of borrowers who cannot otherwise repay their creditors. Much as these laws serve as an aid to Florida consumers attempting to satisfy their loans one payment at a time, the statutes also aid the debt settlement process since the lenders have more to lose should they continue to force the issue. There’s always a chance of legal action, still, no matter the legislative safeguards, since creditors are reserved the option for law suits to recover their funds, but Floridian consumers have far more opportunities for debt settlement negotiation from positions of strength.

Every debt settlement company shall demand some money for their services, but the overall fees could differ greatly from program to program. Annual administrative fees are fairly common place, there are bills to be filed, but a few of the less reputable companies add on monthly expenses. None of these extraneous charges should be particularly large or notable, but they accumulate over time and are signals of other potential concerns. Florida borrowers should keep in mind that they will want to investigate each debt settlement business thoroughly before signing along with their program. Any sincere exploration of debt relief programs, whether Consumer Credit Counseling or debt settlement or another approach, depends upon both the reputation of the companies and the level of trust that the consumer may or may not develop with the counselor they will be working with. Contact the local chapter of the Better Business Bureau and the Florida state attorney general’s office to see if there are any complaints from past customers. Check on line to try and suss out the company’s reputation. In truth, since the debt settlement industry remains a fairly recent endeavor, many Florida consumers have utilized the internet and found remote debt settlement firms that did just as good of a job (often, at reduced costs) as the store fronts larger cities may offer.

There are, of course, expenses to be paid. Florida consumers shall find disadvantages with any such program that intends to carve away financial obligations already spent. Borrowers accepted into the debt settlement system will find harmful consequences as to credit ratings and FICO scores though they will be much less dramatic than what would be felt from bankruptcy protection. Furthermore, lenders could always call the debt settlement counselor’s bluff and initiate legal actions for seizure of property or wage garnishment, and, without the automatic stay guaranteed by bankruptcy protection, representatives of the creditors – or, worse, the collection agencies they’ve hired – may continue to harass and threaten borrowers for payment. The debt settlement solution does not guarantee success. Furthermore, the debt settlement program will not do away with Florida borrowers’ past credit problems. Anything that the three credit bureaus (Equifax, TRW, and TransUnion) have recorded upon the borrowers’ histories shan’t be easily removed unless the information could be proven false. A few years ago, the United States congress passed the Fair Credit Reporting Act which was intended to ensure that all data documented on the credit reports would be demonstrably accurate and that lenders which could not back up the black marks they had presented to the credit bureaus must withdraw their notations. Unlike Chapter 7 or Chapter 13 bankruptcy protection, which can stay upon a credit report for as long as a decade, negative payment records only last for seven years, and, while debt settlement does not score the same as a defaulted loan, there’s still repercussions from debt settlement as to FICO scores.

This is an important distinction. While the debt settlement company shall dole out funds to the creditors, the primary responsibility – the entire responsibility, in the eyes of the law – for the actual debts falls to their clients. In many ways, this should be considered an asset for Floridian consumers, and this is one of the reasons that debt settlement solutions are better received in terms of credit ratings and FICO scores. Since Florida debtors retain liability for their credit card debts and other unsecured obligations covered under the debt settlement negotiation process (unlike the Chapter 13 discharge or effective default that Consumer Credit Counseling engenders), they gain positive points within the vaguely understood Fair-Isaacs scoring system which all of the three credit bureaus employ for every payment made on time. However, while that aspect of the debt settlement program should certainly be seen as positive, Florida residents must remember that – since the responsibility for the obligations remains their own – they need check up on the settlement company to make sure the bills paid arrive promptly. Even the most respected of debt settlement firms shall occasionally make a mistake, whether from computer malfunction or lender schedule alterations notated too late, and it’s up to the individual Floridian to talk to the credit card representatives and discover whether or not the payments are being made. For that matter, though this should seem common sense, Florida borrowers would also be wise to ensure that the reductions of interest rates and balances promised from the debt settlement company are seen on the actual statements.

The effectiveness of debt settlement negotiation depends upon a shared realization between the lenders and the debt settlement professionals about the looming possibility of bankruptcy protection. After credit card accounts or similar unsecured loans have turned delinquent, lenders have a set variety of what they could reasonably do in order to recover their funds. Fees accrue, of course, interest rates escalate (sometime exponentially), and negligible minimum monthly payments become unfathomable burdens. Remember, despite their many threats, the lenders would much prefer that the borrowers would simply repay what’s owed rather than having to go through the trouble and expense of fighting a case in the Florida courts. Delinquencies, though there are tax breaks involved, help no one: the lenders won’t get paid and the borrowers’ credit ratings are effectively destroyed. If at all possible, the credit card companies will want to try and work out a payment schedule that their clients can afford, and, if it seems that Chapter 7 debt elimination bankruptcy would be attempted, the creditors will jump at the chance to negotiate a debt settlement alternative even if they have to give up more than a third of the funds owed. After all, even if they end up asking for only forty or fifty percent of the original balances, the guarantee – or, at least, the word of a respected debt settlement company – of some money is better than nothing.

It’s important for consumers to maintain cordial relationships with their lenders, but Florida residents should also remember that representatives of the credit card companies have a vested interest in keeping their clients paying interest rates for as long as they could. The credit card conglomerates will have their own form of consolidation programs with lower interest, perhaps even offering minimal cuts to balances, but they will virtually never be the best alternative available for unsecured debt elimination. No matter how friendly the lender reps may seem, they’re hardly likely to discuss other sources of relief: debt settlement, especially. For ordinary Florida consumers, the debt balances themselves should be considered beyond negotiation. Credit card companies will not soon bend down to the demands of Florida consumers without professional representation. Unless the lenders are convinced that their competitors are ceding precisely the same percentage of funds owed, they have no reason to do more than shrug away past over limit fees and vaguely lower their interest rates. Much as debt settlement negotiation may seem like more of an idea than a craft, creditors need to know both that a reputable company honors their clients’ promise of repayment and that all lenders shall be treated equally. To this point, it may even be necessary for Florida consumers to intentionally skip payments so that their debt settlement counselor could have proper leverage for the eventual negotiations. This shall hurt any Florida borrower’s credit scores in the short term, true, but – should the debt settlement company shave off nearly half of their clients’ debt load through a series of phone calls – the savings should be certainly worth the temporary reduction of credit scores.

Of all the financial strategies borne upon the diminishing impact of bankruptcy protection in the modern world, debt settlement seems to have met the most success for aggrieved Florida consumers struggling with credit card burdens. Still and all, there are warning signs to be avoided. Every debt settlement company shall demand some money for their services, but the overall fees differ greatly from program to program. Annual administrative fees are fairly common place, there are always bills to be filed, but a few of the less reputable companies add on monthly expenses. None of these extraneous charges should be particularly large or notable, but they accumulate over time and are signals of other potential concerns. There’s so much to be analyzed before any decision should be made by a Florida household attempting to juggle their debt obligations against prospective earnings. For home owners absolutely convinced that they will soon receive sufficient money to cover their accumulated bills, equity loans – despite the plunging Florida real estate markets – may genuinely be a worthwhile solution. Certainly, for borrowers that have weathered genuine calamities and have no assets worth protecting, Chapter 7 bankruptcy remains a much needed port against the creditor storm. Given the space constraints of an article such as this, there’s just no way for your authors to pretend that they could honestly advise any Florida borrower of the most beneficial debt liquidation maneuvers without taking a close look at their financial standings.

At the same point, while so many Florida residents fight against their mounting bills, relief from credit card bills has become a necessity for any consumer who does not believe he or she could easily eliminate their amassed unsecured burdens within a reasonable amount of time. Considering the state of the economy (and the nature of compound interest), there’s no reason Floridian borrowers should presume that their debts shall grow more manageable without a decisive strategy and the assistance of professionals trained in the practice of financial solutions. As should be clear from the paragraphs written above, we believe debt settlement – for those Florida consumers who can show enough demonstrable income and the right sort of debt (some credit card companies yet resist the program) – to be the gold standard of all of these programs, but it will be left to the individual borrower to discover for themselves what shall work best for their own household. No debt scenario is alike. Some Florida borrowers found themselves in this predicament through thoughtless spending beyond their means while others, struck by medical emergencies or familiar distress, simply had no other choice. As we have written, there’s as many different debt solutions available to Florida residents as there are debt portfolios, and, much as we strenuously recommend the debt settlement option, every consumer must inevitably speak to a professional debt analyst themselves.

Importance of CIBIL Credit Score in Indian Loans

Importance of CIBIL Credit Score in Indian Loans:

Your CIBIL credit score is an indication of your financial stability and helps lenders decide if you are an individual worth taking a credit risk or not. Basically, a credit score tells the lender what’s the probability of you paying back the loan that you have sought.

Your CIBIL credit score is calculated on your history of credit usage and the way you have handled past payments. If you have been regularly paying off your equated monthly installments (EMIs) and haven’t defaulted you have a higher score. If you use credit in moderation, and don’t go about borrowing beyond your means, you will have a higher score, which in turn improves your credit rating.

Scores between 700 and 800 are considered to be good, but now lenders are enforcing stricter norms. If you have a score below 650, it is most likely that your loan application will be rejected or you will have to pay very high rates of interest. If you have a score below 600, you won’t get a loan.

The lower your CIBIL credit score, the higher is the probability of default. You should access your score at least once in a year so that you get an indication of your credit rating. If you are planning to take a big loan (for example, a home loan) in the next 24 months, then it is advisable that you check your score every six months so that you can improve it and increase your chances of getting a loan.

What will affect your Credit Score?

If you have no credit history, creditors may treat you the same way as if you have had bad credit. This might seem unfair, but the rationale behind is that you have not established a history to show that payments are made over an extended period of time.

Score parameters: The credit score of every person is different and is an evidence to varied credit behavior. The credit score is not a permanent one. It is extremely dynamic and keeps changing as a person changes his financial behavior.

The score is calculated based on the person’s credit profile parameters at that point in time. It is important to know that the following parameters are taken into consideration while calculating a consumer’s credit score:

Credit Utilization: How much credit is being used? Consistent high utilization of the credit limit is unfavorable, and vice versa, the lower your credit utilization, the better. As it suggests that one is using a small amount of the credit that’s been provided to them.

Defaults/Repayment History: how many accounts are due in past – by how many days and by how much value? If you have already taken any loan your payment history is the most important factor that determines your credit score. Regular repayment of loans means you are awarded a higher score. If you have missed payments, delayed or defaulted on payments, your score will be much lower.

Secured versus unsecured loans: If your credit portfolio has a higher percentage of secured loans (auto loans, home loans), your credit score will be higher. If you have a large number of unsecured loans (credit cards and personal loans) it shows bad money management and results in a lower score.

Credit Inquiries: If you have too many inquiries against lending institutions for any kind of credit facility, no matter that you have been granted the loan, it reflects poorly on your credit score. It shows that you are in constant need of funds.

Credit Age/Trade Attributes: How old are the consumer’s lines of credit? What type of credit does he have? Does the consumer have a good mix of credit or is it all credit cards?”

Five Steps Improve Credit Score

In today’s time, the need for credit is very imperative. If you have defaulted on your payments for any reason, your credit information report will promptly report it. With a bad credit report, you are unlikely to get any loan or credit card from any bank. However, that does not mean you are scarred for life.

Rebuilding your CIBIL score is a slow process. Follow these simple steps that help you to improve your credit score.

Step 1:

Pay off existing debts. The most effective way to improve your credit score in this area is by paying down your revolving (credit cards) debt. In fact, owing the same amount but having fewer open accounts may lower your score.

Step 2:

Opt for a secured credit card, which is usually given against the security of your fixed deposits. ICICI Bank, HDFC Bank and Axis Bank are the three banks that issue secured credit cards in India.

Step 3:

Go for a Consumer Loan (T.V, Refrigerator, other Home needs) by providing PDC (post dated Cheque) as security and repay the entire loan without any delays.

Step 4:

Go for a personal loan using an asset as collateral or as an unsecured loan. Paying dues towards this loan on time for the next 12-24 months will help in reviving your credit history.

Step 5:

Don’t make too many inquiries for more credit cards and loans. Also, abstain from taking huge loans until your score has improved and you are financially healthy.

Usually, CIBIL maintains your credit history for 7 years but displays month-by-month repayment record for the last 36 months. This essentially means that if you are on a clean slate post repayment of your old debts, and promptly pay your new dues and loans, your credit history will start looking up after three years.