Credit score plays a very important role when it comes to loans from banks, financial institutions and NBFCs. A large population in the country consists of those people who are unable to get loans from banks or financial institutions due to lack of credit score. According to the World Bank data, there are about 190 million people in the country who are out of mainstream financial services. So they don’t have a credit score. This is the reason why they are not able to get loans from banks or financial institutions.
If you have a weak credit history, there are many ways to improve it. However, it is also true that people check their credit score at the time when they need to take a loan. That’s why experts recommend checking it from time to time so that if there is any difference in it, it can be corrected. If you have recently started a job, this is the best time for you to strengthen your credit score.
Credit score tells your ability to take loan
Credit score is a number between 300 and 900 which determines how your creditworthiness is. Anurag Sinha, CEO and Co-Founder, OneScore, says that when you apply for a loan, the bank or financial institution decides to give you the loan after looking at it. The higher your credit score, the more reliable loan customer you are to the bank or financial institutions. If you have a good credit score, you can easily get a loan at a low interest rate. Also, the credit limit of the credit card can also increase. Having a good credit score matters a lot when you take a loan without mortgaging a property (collateral-free loans).
Reasons for low credit score
Late payment- Delay in credit card payment can affect your credit score. Even one or two delays in payment can affect the credit score.
missed payments Many times you are not in a position to pay the bill. In such a situation, you can pay the minimum amount as compared to not paying the full payment. If you don’t pay at all, your credit score can go down.
Inquiries from different places – If you have applied for a loan or card in multiple banks, then your credit score may be low. With such inquiries the credit bureaus can lower your credit score.
wrong information – If you provide incorrect or incomplete information while applying for a credit card, it can lower your credit score. In such a situation, it is necessary to contact the bank and update your correct information.
ways to improve credit score
get secured credit card Secured credit cards are issued against a mortgaged asset, usually a fixed deposit. It helps in improving your credit score.
Timely payment- EMI or credit card bill, it is necessary to pay the bill on time. Timely updating of credit card payment bills from Electronic Clearance Services (ECS) is good for your credit score.
Reason for using credit card – Unnecessary use of credit cards can also lower your credit score. If you have used your credit card more than 70 percent of the times during your transaction, then your credit score may be low. So try to avoid such situations.
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Can I get loan even without credit history?
A good credit history can also get you a cheaper loan. If your credit score is not good, then the customer investigation gets lengthy while giving the loan. Banks ask for your account statement, income proof etc. Even in case of secured loans one has to go through these procedures. Secured loan is given by mortgaging a property. Car loan, home loan, business loan are secured loans.
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