Insights on Improving your Credit Score and Get Free Credit Score

 

Splurging money on extravagant shopping is quite common among younger generation today. A plethora of shopping options makes it all the more difficult to desist from the buying spree. Over time, this results in a lower Credit Score and affects an individual’s eligibility to apply for a loan. A lender looks for a good credit score before approving the loan.

Credit score is basically a 3-digit number that represents one’s creditworthiness. The credit score is calculated based on various aspects like credit history, repayments and credit utilization. Credit score generally ranges from 300-900. A higher credit score is crucial to securing a favorable loan.

Factors That Affect Credit Score

• Delay in Payments: A payment history directly reflects how trustworthy an individual is. And, in case a person is carrying a high debt obligation, a lender may consider him not to be financially trustworthy. To avail loan and increase credit score, individuals must clear their credit card bills and EMI on time. Moreover, a person should also avoid defaults, foreclosures etc.
• Principal Card/Loan Holder: Joint Loan is undoubtedly very advantageous. However, under any untoward circumstances, if the co-applicant defaults or meets unexpected demise, the principal cardholder will have to bear the loan obligations and pay back all the debt. In that scenario, the credit score of the person suffers.
• Opening a New Credit Line: If an individual opens a new credit line, there are higher chances of loan rejection. The individual needs to prove his credit worthiness for a prolonged period of time to maintain a higher credit score.
• Closing Old Credit Card Accounts: One of the important factors that affect CIBIL Score is the age of a person’s credit card. Never close a credit card on which there is a good track record on repayments. If that particular credit card is not in use, retain it to maintain a higher credit eligibility.
• Restrain Credit Card Usage to 30%: Usage of credit card plays a vital role in determining credit score. This is a fact unknown to many. So restrict credit card usage to 30% to ensure the CIBIL score to be in a right shape.
• Dearth of Information: A bank always prefers to have as much information as possible before approving a loan. While granting a loan, be it a home loan or car loan, a bank prefers to cross check the credit history of the person’s other financial obligations. This reassures the lender that the applicant is quick in repayments of debt. Hence, it is advisable to start using a credit card only when the person starts earning to avoid any red flags. This will surely help in building a good credit history and, resultantly, a good credit score to avail a loan in the future.

Refrain from applying for a loan in case of a continued rejection of applications. Fix your credit score before trying again. While a good credit score is crucial for loan approvals, lenders scrutinize other aspects too, before approving a loan. From employment history to employer, home location, current bank records, everything influences a bank in decision making. By making timely payments and avoiding defaults, maintaining a good credit score is not as difficult as it sounds.