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8
Jun

Improving your Credit Score

"Your first impression is your last impression." That’s the reason why we are so conscious before meeting anyone for the first time. Similarly, for the bank lending you for the first time, your first impression about your credit history and your repayment habits is rendered by your credit score. Your credit score is a numerical expression of your credit history. Along with the credit score, a credit report is generated which reflects your borrowing and repayment habits by providing information about the nature of loans (including credit cards) held. Further, such a report is a combined report for all the loans held across various banks, and thus helps the bank to take a decision on whether to grant you another loan or not. As such, the credit score clearly impacts our access to fresh loans and credit cards and as such, it becomes important to maintain a good credit score. Here are a few techniques to improve your credit score:

               

  1. Timely Repayment of Credit Card/ Loan Instalments – As a responsible borrower, one must always be careful to pay off the credit card outstanding and loan EMIs on timely basis. Since your credit history is defined by your repayment habits, a good repayment history will translate into a higher credit score. While credit cards allow you to pay minimum amount due, you should always strive to pay off the entire outstanding as paying off your unsecured loans timely also helps you improve your credit score.
  2. Avoid Random Inquiries for Loan/ Credit Cards – Every time your credit score and credit report is fetched, CIBIL records it in the credit report itself. The credit report highlights on the number of inquiries made for the credit score along with specific information about the inquiries made over last 30 days, last 12 months, last 24 months etc. As such, in case a higher number of inquiries are featuring in your credit report, you may be considered as a credit hungry. Repeated inquiries about loans/ credit cards highlight upon an individual’s excessive reliance on debt and further, in case there are multiple inquiries of loan concurrently, this may indicate the reluctance of several institutions to sanction you a fresh loan/ credit card.  
  3. Keeping the outstanding balances low – The spending pattern of an individual is highlighted by the utilization patterns of the credit limit of the credit cards. As such, if you regularly use your credit limit and further, only paying the Minimum Amount Due, credit score gets an adverse impact.
  4. Maintain High Proportion of Secured Loans – The credit score gets impacted if your loans are majorly unsecured loans.An unsecured loan reflects a higher credit risk for the lender, as there is no security for the lender to fall back upon in case you make a default. Therefore, you should always strive to maintain a higher proportion of secured loans and aim to pay off the unsecured loans as early as possible.

 

While the above credit habits may seem simpler, practicing them on a continued and sustained basis over a longer period is your key for a better credit score and therefore access to more credit options.

 

Edelweiss Partners is the largest distributor of loans and has strategic tie-ups with multiple Housing Finance Companies and lending companies in India, enabling us to offer the complete range of loan products to our partners’ clients.

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