Ways To Maintain Your Credit Score – An Infograhpic

If you need to maintain your credit score, it won’t happen overnight.Credit scores take into account years of past behavior you can find on your credit report, and not just your present actions. But there are some steps you can take now to start on the path to better credit, read our infographic to know more..

Why Do Banks Love To See The 750+ Mark On Your Credit Report?

When you apply for a loan of any kind, irrespective of your background or your ability to pay a lump-sum in your down payment, one important tool that helps the bank trust your ability and your intent to repay is a good credit score. Since the time credit bureaus have come into the picture, a credit report has become a financial bible for the banks.

A credit score is an aggregation of all your loans and credit cards. It reflects your creditworthiness and credit health. A score between 750 and 900 is the equivalent of an A/A+ on your school report card. It implies you’ve been very responsible with your credit, paying your EMIs and dues on time and in full each month. Even if you had a low score at one point, you’ve worked hard over time to reclaim a top spot on the credit score charts. In short, you’re very mindful and responsible when it comes to credit.

Your score also reveals that you’re a relatively safe bet when it comes to borrowing money from a lender or availing credit card facilities. According to credit bureaus, the lowest interest rates tend to go to borrowers with credit scores in the 750-900 range, which means your high score will also help you save money down the road. Besides these advantages, a 750 above score is also loved by banks. Below are the some of the reasons:

1. Judging your reliability becomes easier: The credit bureaus like CRIF are RBI regulated and for scoring an individual they employ sophisticated statistical analysis of your repayment performance on loans and credit cards listed in the credit report. A credit score takes into account many parameters, and helps bank predict future riskiness of a customer. The credit score thus becomes one of the major criteria for the bank.

2. Saves the bank a lot of time: The credit score is a sum of your loan repayment behavior so the bank saves a lot of time in analyzing how your credit behavior is or your ability to repay. The loan sanctioning process is simplified and is a lot faster. As a customer, you get your loan decisions fairly quickly.

3. Accuracy is on point: Initially, the traditional ways were adopted to verify an individual’s credibility which differed as the process depended on varied sources thus making the results volatile in nature. Since the time credit bureaus like CRIF have come into the financial world, the decisions have become more objective, data driven and also standardized. Therefore, the accuracy of the decisions have improved and also more dependable.

A good credit score is the magic wand that does the trick on banks when you apply for your loan to fulfil the most awaited dreams. The banks come across thousands of application for loans and the credit score helps them accept or reject applications in a more organized way and also quite quickly. A bad credit score can make you a risky bet while a strong credit score is encouraging to banks, ensuring you get the best deals out there, which saves you time, money and worry.

What’s In Your Credit Score?- An Infographic

Check out our infographic to know what affects your credit score and how your actions could improve or hurt your creditworthiness. While various credit scoring models may weigh each factor differently, we’ve listed out the most important ones for you.

Checking My Credit Report Affects My Credit Score? Or Not?

We know how important a credit score is in our everyday lives especially in our ability to take loans. Did you know it is equally important to check your credit score at regular intervals? There are a number of reasons to do so – some of them are to keep a track on your credit standing and take necessary steps to improve or maintain the credit reports and credit score. While we all know that checking your credit score is important, one thing that bothers a lot of consumers is if checking their own credit report will hurt their credit scores. We are breaking down the entire process to give you a crystal-clear view.

What does ‘credit report check’ or credit score check mean?
A credit report check, also known as an inquiry for credit score is either done by you or by the potential lenders of loan or credit cards such as banks, NBFCs and other financial institutions. A bank checks your credit score usually when you apply for a loan or a credit card to know the creditworthiness of the applicant. Further, a bank can also check your credit history and credit score while you are a loan or card customer of the bank to monitor its portfolio of customers.

Credit Report Check shows or not Hard Inquiry Vs Soft Inquiry
A credit report check or a credit inquiry can be classified into a hard inquiry or soft inquiry. Hard inquiries occur when you apply or request for a new credit card or a new loan or a line of credit like increasing the credit limit on a card. Such inquiries leave a footprint on your credit history and show up on your credit reports. Too many hard inquiries over a short duration have a negative impact on your credit score, especially if the credit keeps getting denied.

Hence, it is advisable to limit your applications for credit card or loan. Make sure you’re only applying for credit only when it really is necessary. Select a credit card and a bank after doing research rather than blindly applying for credit with many banks. Want to know about the ways that can positively impact your Credit Score? Read our blog, “4 ways to Build a Great Credit Score.”

On the other hand, soft inquiries occur when an individual checks his own credit report and credit score. These are the type of inquiries that do not show on the reports, no matter how many times you check your credit report. Even if these appear on your credit report, these will never affect your credit score despite you checking five times in a single day.

When you are pre-approved for a special credit card offer or personal loan, it is very likely that the Bank would have carried out a soft inquiry on its existing customer base, such as you. Banks periodically review its existing pool of customers for assessing risk of its loan portfolios and finding out good customers whom to make pre-approved loan offers. Since these are soft inquiries, you do not need to worry on any negative effect of these checks on your credit score.

If you want to still keep a record of the inquiries just to stay more informed about them, CRIF can help you with the annual credit report with details of hard inquiries in your credit report.

Keep a check, always.
Consider your credit scores as a pie that represents your financial being. Your pie is divided into slices, each of which constitutes of different factors. One large slice is your timely payments, another is your length of credit history and yet another is total credit used. And then there is a tiny slice which represents your hard inquiries. It is essential to control your hunger and not to bite this slice. This diet won’t help you to lose weight but can definitely help you gain some points on credit score. It is essential to keep your credit on a check as it gives you an accurate position of your credit standing.

To ease out the hassle of keeping a check on your credit score, you can contact CRIF. It is an RBI-approved credit information bureau that gives trusted and accurate results of the credit score.

Just entered your first job – Start Building your Credit History too

It is simply a great feeling when your first salary gets credited into your bank account. Getting financially independent is certainly an achievement, but at the same time, it comes with equal responsibilities. Knowing one’s urge to spend and more so these days over digital means, banks start approaching you for credit cards and you also start getting excited and apply for a couple of most rewarding credit cards. But alas! the credit card application gets rejected. The Reason, you don’t have any credit score – i.e. no history found in credit bureau. However, you shouldn’t worry, as building a credit history is not a tough thing to do.

The first steps to Building a Credit Score

The best thing you can do is to just start off with applying for a credit card with the banks you are holding a Savings Account already or where you open your Salary account. You can also apply for one of the basic cards, to begin with rather than going for the most premium card the bank has to offer. Specially designed credit cards are now being offered by banks to those who have just joined the workforce. If you are employed in the public sector or with reputed private companies, you may be eligible for a credit card based on your salary slip. If you are not getting a credit card even from the bank where you have salary account, you can apply for a secured credit card against a fixed deposit – you can begin with as low as Rs. 20,000.

Another way of building your credit score could be exploring the exciting zero-cost EMI offers offered by financiers for mobile, bike or laptop. These also require a credit score for approval, however, many of the lenders approve loans for people with no credit score.

Maintaining a good Credit Score

Since now you have begun building your credit history, here are a few tips to maintain a good credit score too:

  • Use your Credit Card, though control your spends: Just getting the credit card will not get you good credit score. Try spending only up to 40% of your credit limit to keep the balance low it will help you repay the full amount on the due date.
  • Repay your card dues and EMIs in time: A consistent regular repayment on your card dues and EMIs will definitely help you with a good score. If you took an education loan, repaying when EMI’s become due also helps you build a credit score. If you become delinquent and default on your education loans, your credit score will be negatively impacted because the lender will report that you are not in compliance with the terms of your loans.
  • Limit Your Applications for New Card or Loan: Too many credit inquiries on your profile by banks whether they be for a credit card or a loan also can also bring down your score, so make sure you’re only applying for credit only when it really is necessary. Select a credit card and a bank after doing research rather than blindly applying for credit with many banks.
  • Checking your Credit Score regularly: Don’t lose the good credit score you’ve worked for! Just like a car that fails to work if not maintained, credit history too can fail to work if it is not maintained. Tracking your credit score every quarter helps you stay on top of your own credit report and thus, maintain a good credit score.

Now that you have mastered the art of building and maintaining a good credit score, pat yourself on the back and start dreaming for the better things in life, right from the newly launched bike to the latest I-Phone to a swankier car and a beautiful house, you can have it all…!!

 

4 Proven Hacks to Build a Great Credit Score

Building a good credit score is very similar to building a good reputation; both require an immense amount of work and patience. Loans are a crucial part of the modern man’s life and building a rock-solid credit history is of paramount importance for getting a big loan approved. If you are successful in maintaining a high credit score your quality of life will take a 180-degree turn as you will be able to buy all the luxuries in the world for yourself and your family.

But the sad part of the story is that your scores can drop real quick for the smallest of the reasons. It can be disheartening to know that you have a low score when you open your credit report. But hey, do not be discouraged, you can still work things out! Wondering how? Look no further, we have compiled a list of 4 things you can do to build a great credit score.

Repay your card dues and EMIs in time:
Yes, however stereotypical this suggestion sounds it is actually true. Every credit risk analytics expert swears by this strategy. A consistent regular repayment on your card dues and EMIs will definitely help you with a good credit score. If you become delinquent and default on your loans, your credit score will be negatively impacted because the lender will report that you are not in compliance with the terms of your loans. Even if you missed a payment, do not sulk in worry. Get up and bring your loan to regularity now.

Utilize your card with caution Don’t use the card to its full capacity:
Having a credit card is not your ticket to go overboard on shopping! Things can take a detour and you may soon find yourself in a pool of debt. Using the card to its full capacity is never the right thing to do. Try spending only up to 40% of your credit limit to keep the balance low it will help you repay the full amount on the due date and also keep your credit score in low.

Limit your credit card applications or loan:
Too many credit inquiries on your profile by banks ‘whether they be for a credit card or a loan’ also can also bring down your score, so make sure you’re only applying for credit only when it really is necessary. Select a credit card and a bank after doing research rather than blindly applying for credit with many banks.

Checking your Credit Score regularly:
Don’t lose the good credit score you’ve worked for! Now’s definitely a good time to ask yourself if you’re being proactive about protecting your financial health. Management guru Peter Drucker said that you can’t manage what you can’t measure. To manage over your credit and your financial life, you must measure your creditworthiness through the credit score regularly. Tracking your credit score every quarter helps you stay on top of your own credit report and thus, maintain a good credit score.

So there you have it, all you need to do is blend these simple steps together and make a great recipe for a good credit score! If you still feel uncertain about how to build and maintain your credit score, you can read our BLOG or feel free to get in touch with us!

 

4 Ways Credit Score Can Impact Your Financial Life

Credit Bureaus such as CRIF are dedicated organizations set up to assess the risk of a loan being given to an individual or a business by banks and financial institutions. Various factors like paying your EMI’s and card dues on time, how long you have had and used credit, number of credit inquiries you have made in a particular amount of time etc. are considered to determine a person’s credit score.

Having a good score with credit bureaus is one of the most prominent characteristics of a responsible person. A good credit history indicates that a person is in control of his/her finances and has made past payments on time without any negative remark. Generally, the higher the number, the more trustworthy you appear to lenders. The lower your score, the more difficulty you will face. We take you through the potential effects a credit score can have on your financial life:

1. Incurring Lower Interest Rates on Loans
If you are in the good books of credit bureaus, then you’re most likely to incur lower interest rates on loans while, on the other hand, you might not get a loan at all if you have a poor credit score. For a score with a range between 300-900, a credit score of 700 or above is generally considered good. People who keep paying timely installments on their loans and credit card dues get extensions on limits subsequently when their credit limit gets stretched. A good credit gives you the negotiating power when applying for a loan in terms of interest rate and loan amount.

2. Get Home Loans Processed Swiftly
Owning a home sweet home is the dream of every individual. If you are looking to buy your dream apartment, there are two things you consider: a pretty home and a not-so-pretty home loan. However, what matters the most in swift approval of your home loan is your credit score. Home loan limits are dependent on income but a poor credit history might cancel out / nullify your chances of getting one irrespective of how much you are currently earning. On the other hand, with a good credit score, the chances of loan approval are higher. This is because the lenders consider you as trustworthy. Read our blog 4 things to consider Before You Apply for a Home Loan to land into your dream apartment.

3. Employment Prospects
The penetration of credit score has gone beyond as an integral part of the loan approval process for banks. It is increasingly being used as the selection criteria before scheduling interviews. Employers in banking and financial services (BFSI) are checking credit scores of candidates as a part of their employee verification process before hiring them. So if you are searching out for a job, then not only preparing for the job interview but checking your credit score and improving it also becomes indispensable. A lower score can thrash your desires of a dream job.

4. Others
Globally a credit score is also used by the insurance firms to set the premium charges on their policies. Even telecom companies use it to set the security deposit that they require before giving a connection or decide the credit limit. this is beginning to happen in India as well, as insurance and telecom companies have begun using credit scores. We are already seeing early use of Credit Scores to establish credibility of the groom in case of arranged marriages and of the tenant in case of rentals.

Hence a bad credit score affects many more aspects of your life than what you must have imagined. Any bad credit decisions will keep you on the back foot. It may not put an end to your financial journey, but it definitely slows it down. Though there are lenders who might be willing to offer loans even with a low credit score the rate of interest tends to be significantly higher in such cases. Hence it is prudent to maintain a good credit history. Like an annual health check-up do a regular credit score check too, to take charge of your financial life. You can get your credit scores in a few simple steps by visiting https://cir.crifhighmark.com

 

How I Raised My Credit Score By 250 Points

I had already unfolded the climax in my previous blog, on how I was being denied higher education due to my own credit mistakes. This blog is essentially the return of the hero who fights with bad credit and lives happily after with a great credit score.

850. That was the number printed on my latest CRIF Credit Report. Read ahead to know – How I Raised My Credit Score By 250 Points.

Credit Score = Trust?

One of the premises of a civilization or society is its need for safety. It is because of this need for safety from the wild did the early human start forming communities. Humanity has evolved and advanced a lot from them, but the basic need for safety is perennial. It is very important to have those few trustable companions or entities who make us feel safe.

Since the age of the Kings and the Landlords, the practice of lending also pivoted around the similar element of trust. Lending has transformed from being a local, personal referral based activity now into a very large industry backed by digital systems and a sense of trust emanating from the use of data sciences. The industry allows instant lending and peers to digital peer-to-peer lending on basis of data-backed trust that the person taking the credit will pay back after the pre-defined time. This data-backed trust comes from the “credit scores” provided by the Credit Bureaus by understanding behavioral patterns from the millions of records of individuals such as you and me.

I realized that I had to improve my credit score from 500 so that a bank can begin trusting upon me to repay its money. In my quest to improve, I began analyzing my credit report against the five major factors that form the basis for a credit score. And voila, I had devised a clear plan of action to seize control of my credit situation-

  • Payment History : my credit report clearly reflected my negligence around making payments towards my credit card dues. I would generally pay up money only after many follow-ups from the credit card companies, perhaps this was one of the most important factors barring me to pursue my dreams. I immediately cleared pending dues on all of my credit cards and vowed to now pay full dues at least 3 days prior to the due date.
  • Age of Credit : I had 4 credit cards. Since now I have to pay on all cards in time, I decided to close 3 of these cards. I decided to maintain the oldest credit card I had, as the higher age of credit means a better credit score.
  • Credit Utilization : The average spend on each of these 4 cards was nearly 80% of the assigned credit limit. This meant that the credit utilization ratio was 80%, which ideally should be 30-40%. The credit card I chose to retain was linked to my salary account. My banker helped me get the credit limit of this card increased. This enabled me to enjoy higher credit just with one card, but have a low utilization. I crossed my heart to not use above 25% of the allowed credit limit at any point.
  • Type of Credit : I pledged to explore a car loan (secured loan) and diversify from just having credit cards (unsecured loans). And the next year when I had a slightly better credit score, I took two additional loans, one for buying a car and the other for buying a laptop and paid them off in the same year. This allowed me to add different types of credit as well as provide better evidence of my credit behavior.
  • Number of Credit Inquiries : This did not seem to be a problem for me, however, I have since then avoided unnecessarily applying for credit cards or loans.

12 months of discipline had helped me improve my score from mid 500s to 670, it helped me get a car loan — but it wasn’t enough to help me fulfill my dream. After another six months of care, my credit score was above 750 and I was packing my bags to leave for an MBA. All I needed was a basic understanding of credit score and discipline to follow my plan. Last month I repaid my education loan but still continue to follow the rules I set for myself 5 years ago. As you read my story, let me tell my credit score as of today stands above 850.

Today, in parts of the world, your credit score can stand in your way of getting accepted as a tenant, employee or even spouse. Hence it is becoming paramount to manage your credit score to maintain your credibility not just for getting loans but for fulfilling your dreams. Don’t let your ignorance hamper your dreams.

Get Educated and Educate Others. Journey to happy credit starts here – CRIFHIGHMARK CREDIT REPORT

About the Author: Subhankar Mishra works as Service Delivery Manager at CRIF High Mark, India’s largest Credit Bureau database.

How often should I check my credit score? – What’s the myth? What’s the truth?

Credit Score is one of the most important factors of your financial credibility and often people are confused about various things related to it. ‘How to check score?’ ‘When to Check Score?’ ‘How many times should you check it in a year?’ are some of the most commonly asked questions. It is important to know your answers, know the truths and myths behind them.

Firstly, answering the most frequently asked question, ‘How often should I check my credit score?’ The answer is you can check it however often you wish to. It is a common myth that checking your own credit score frequently has a negative impact on your score. There is some negative impact on your credit score if you apply for new loan or card very often or with many banks at the same time, as the banks would make as many ‘credit inquiries’ with the credit bureau. With high number or frequent ‘credit inquiries’, the credit bureau believes that you are desperate to get a fresh loan, therefore, considers that behavior negative.

Having said this, it is not necessary to check your credit score all the time or every day. Let’s guide you through the ‘how’ and ‘when’ to help you determine the right time to check your credit score.

Who should check credit score?

A credit report is generated only when you own a credit card or have a loan taken in your name. Credit scores are calculated from the credit report. Therefore, whoever meets the above criteria is likely to have a credit score. All such people should certainly and regularly check their credit report and credit score.

What If You Never Had a Credit Card or Loan Before? When you have not borrowed in the past or have never had a Credit Card or a loan, there will be no updates about you with the credit bureau, who mark such cases as NH or ‘No History’. Due to a lack of details, the credit bureau will be unable to comment on your payment behavior. In such cases, we advise to start building your credit score and checking it once a year. For more details , you could visit our blog What do banks see when they look at your credit report?

When should you check your credit score?

When to check credit score completely depends on your comfort level and your credit activity. Checking your credit score once every quarter is perfect but people often check it twice a year or even monthly at times. The credit score should be checked and the credit report reviewed at least once in a year that’s a minimum!

It is important to remember that checking your credit score on your own does not impact the credit score at all, even if done very often. In fact, keeping a track of your credit score frequently makes sure that you are aware of your creditworthiness, you are taking informed decisions about your credit, and you have a clear picture about when and how to maintain your credit score. A quick reminder, avoid focusing too much on the day-to-day changes and try to identify the overall trend in your credit score. Below are some reasons why you might want to check your credit score or credit report:

  • Before applying for a new credit card or loan such as housing loan, auto loan to avoid any surprises
  • While building or improving your credit history to keep a track of your credit scores
  • After settling off or closing a loan to know if the updates were made

When Not to Check Credit Score?

There is no such time when to avoid the credit score. The importance of credit score has been talked about in every other financial article. It has to be a part of your yearly routine at least to stay updated and informed.

Even when you have good credit score, it is important to keep an eye on any drops in score or inaccurate information on your credit report and to ensure that it is maintained above acceptable thresholds. If it is on the lower end, make sure you change your habits and take conscious steps to bring it up. Also, minor changes on your credit report or credit score should not be a cause of concern as these are expected to happen. So checking credit score daily can be avoided.

How to check your Credit Score?

There are various online websites which give you credit score, but the source of such credit scores would be one of the four RBI regulated credit bureaus such as CRIF. When it comes to finances, you ought to trust the expert and give importance to data security.

One of the trusted way to do so is check it from CRIF, a RBI regulated credit bureau. You are entitled to check a credit score and credit report FREE once in a calendar year from CRIF. Checking your credit score is easy three step process – fill your personal details, confirm your identity and download the report.

There is no right time or right day to start keeping a track on your financial credibility. Informed or Unaware, choose wisely.

Educating Myself for My Education Loan

What if you wake up one day and no one trusts you? You can no longer buy the swankier car or that beautiful home you dreamt of. Have you ever had such thoughts? I have had, not very long ago. It was the monsoon of 2011 and India was witnessing some of the defining moments of the decade; Euphoria of India winning the Cricket World Cup, Mass mobilization against corruption inspired by Anna Hazare and Mumbai turning into a hot hunting ground for terror. Amidst all these, my heart was racing faster for my achievements of scoring 700+ in GMAT, grant of Scholarship from Wharton School and Said Oxford. I had landed in the kingdom of dreams. A dream of a joining a top 10 global MBA program bloomed.

Maroon 5 was right when they sang “Nothing lasts forever”. Before I could even climb the next ladder for my dreams, they were thrashed like the storyboard that had been tipped and jumbled, disjointing the order and twisting the timeline. Banks had refused to fund my remaining fees of 60 Lakhs for the education. I was being denied an opportunity because no one seemed to trust me.

Begging was the only form of request I hadn’t resorted to when I met Mr. Nelson, who rather than just rejecting my request, gave me a reason for not being able to help me. He told that my credit score was in the 500s, generally considered as a poor credit score, categorized as High-Risk Applicant by the Credit Bureau, and since it is one of the most important factors in the loan approval decision, no bank will consider giving me a loan with such a credit score.

I couldn’t rely on my heritage as both my parents are loan averse and had even discouraged me to apply for one. I realized that this new unknown “credit score” was standing between me and my dream. It was bizarre as I hadn’t heard of any such concept in the years of my preparation, not from any of my peers, not in any online forums, not in the coaching institutes, never. Having worked for top financial institutions and having traded in derivatives and share markets, I used to consider myself among the frontrunners in financial literacy. And, here I was not even aware of what a Credit Bureau was and what a Credit Score was, a part of the financial world which was about to change the course of my life.

On my way back home, I browsed through the internet to understand what a Credit Bureau was and why is the credit score so important. It was a sort of revelation to understand how critical credit scores are to lending and how most people like me aren’t even aware of it. I was of the view that I could find a way around this credit score and convince officials to grant me the loan, but then I knew, the only option left was to work on my credit score and park my dreams for the time being.

850. That was the number printed on my latest CRIF Credit Report. It’s an excellent credit score which is loved by every bank or lender I speak to. Today not only I am credit worthy, but I can ask for preferential interest rates on my loan. How did I get here? To unlock the trick or secret to an excellent credit score, read my next blog How I Raised My Credit Score By 250 Points.

About the Author: Subhankar Mishra works as Service Delivery Manager at CRIF High Mark, the only comprehensive Credit Bureau in India.