Credit Score: When you apply for a loan from a bank or any financial institution, apart from your age, income, profession, stability of profession, etc. Credit score is also taken into consideration. If the credit score is low, then either the loan application may be rejected or if the loan is passed, then more interest may have to be paid. Many financial institutions first decide whether to proceed further with the loan application by looking at this score.
This score is like a ‘first impression’ in a loan application. However, this does not mean that the CIBIL score alone decides whether the loan application is approved or not, but being higher increases the chances of the loan application being approved.
Credit Score: Bad credit score can spoil your work, know why it is important to keep it better
This is how Credit Score is prepared
A credit information company (credit bureau) collects and maintains payment records of individuals and companies. Banks and other financial institutions provide this complete data to the bureau on a monthly basis. It is through this data that the CIBIL score and report of a person or company are prepared. Credit bureaus are licensed by the RBI and controlled by the Credit Information Companies (Exchange) Act, 2005.
The higher the score, the better the credit
The credit score ranges from 300 to 900 and the closer the score is to 900, the higher the chances of getting the loan application approved. The credit bureaus do not keep the records of any person or company in the list of good or bad credit or defaulter. However, those who have no credit history or no credit activity in the last few years or have all add-on credit cards and have no credit exposure, get a score of NA or NH. It is not a bad score but some financial institutions are hesitant to give loans to such people due to no credit history.
Credit Score: Credit score can be improved in these ways, there will be no problem in taking loan and credit card
How to improve your credit score
- You can improve your credit score by maintaining your credit history. To fix it, use these methods-
- Always pay your due amount on time. If you do not repay the loan on time, it will have a negative impact on your credit score.
- Do not take loans without special needs and avoid excessive use of credit cards. Do not take too much personal loan.
Keep monitoring your joint account and the guarantor regularly as you may also have to bear the loss of their wrong payments. The credit score can be affected by the carelessness of the co-stakeholder (or the guarantor). - Review your credit history regularly.
(Source: cibil.com)
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