Credit Score: You must have often seen that some people get loan easily from the bank, while some people have to make a lot of papad in it. Actually, whether you will get a loan from the bank or not, it depends on your credit score. Those who have good credit score can get loan easily. Credit score reflects the credit history of an individual. It mentions the number of credit accounts held by an individual, total debt, repayment history and inquiries made by the borrower for the loan.
Banks assess the repayment capacity of the borrower through his credit score. Whether to approve the loan application or not is decided on the basis of the credit score. According to Deepika Jaikishan, Co-Founder and COO of Basis, the CIBIL score is like a financial report card of an individual. This score ranges between 300 and 900. When one applies for a loan or credit card, the decision is taken on the basis of this score.
Above 700 is considered a good credit score
If your credit score is above 700 then it is considered as a good credit score. Having a credit score of 750 or above increases your chances of getting a loan or credit card. In this, the borrower also gets attractive interest rates. If your credit score is low, then in this situation you may have to face difficulties in getting a loan.
Industry experts say that people with low credit scores, if they are not currently borrowing, should try to improve their credit scores. For example, you should keep checking your credit score at a regular interval. With this, any discrepancy will be detected immediately and thus you can save your credit score from getting spoiled. Apart from this, people who have a good credit score should also keep taking necessary measures to maintain it.
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According to Jaikishan, if someone’s CIBIL score is falling, then it may be that he has taken some financial decision, due to which its effect is visible on his score. To rectify this, he has to first understand which of his steps has damaged his credit score.
credit utilization ratio
This is the ratio of your credit card’s total limit and spend. If you have used more than 30 percent of your credit card limit in a month, then it hurts your credit score. Experts say that such people should reduce spending through credit cards in the coming months to improve their score.
Pay off the entire loan amount
If you do not pay your credit card bills or loan EMIs in full, it increases your debt. Due to this your debt to income ratio increases and the credit score starts getting worse. To avoid this, you should try to repay your entire loan amount on time.
avoid delay in payment
If you delay or default on your loan repayment, it can affect your credit score. According to Jaikishan, if you have missed your recent payment, you should talk to your bank and try that they adjust your payment without any penalty.
Incorrect information on credit report
Sometimes incorrect or delayed reporting can lead to errors in your credit report. Experts suggest that you should keep checking your credit report and if something goes wrong, get it fixed as soon as possible.
Avoid applying for loan in multiple banks
Everyone wants to get the best deal on loan. Due to this, people apply for this in many different banks. It also spoils your CIBIL score. Therefore, it should be tried not to apply for the loan in many places. Apart from this, if you are a guarantor of a loan taken by another person and he is defaulting on the payment, then it also affects your credit score. The guarantor should also keep checking his credit score regularly.
(Article: Priyadarshini Maji)
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