Hyderabad: Interest rates are going up and banks are tightening rules for giving new loans. Those with low credit score will face problems. Banks will charge even higher interest rates. Those with a good payment and credit history are offered concessional interest rates of a quarter to half a percent. It is indeed a big relief in these days of high interest rates. To get credit score back on track, alter your financial habits, increase savings and reduce debt load.
Credit score popularly called Cibil (Credit Information Bureau India Ltd) score is calculated from 300 to 900 points. More than 750 points is considered as a good credit score. It means you are financially stable, paying your loan installments and credit card bills on time. It is easy to get loans for those such a good score. Lending institutions pay more attention to such things when interest rates are rising.
A credit score between 300-550 points is considered a 'poor' score. When faced with this, look for ways to increase your score step by step. This is not a one day job. It takes years of financial discipline to achieve this. When you want to increase a low score, you should first try to find out the reasons for its decrease. This report can be obtained from credit bureaus or online banking aggregators.
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The credit report should be carefully studied. Then you can find out where the error is. Sometimes the score may drop due to more than one reason. In most cases, not being able to pay the credit card bill on time and not paying the loan installments will cause the score to drop rapidly. Default in installment payments, high loan utilization ratio, frequent inquiries for unsecured loans, false information to lender credit bureaus, guarantor for others, etc may affect your credit score.
When your credit score it low, unsecured loans from banks may not be available. Even if the loan is given, the interest burden will be higher. One can try to take loan from Non-Banking Financial Institutions (NBFC) which charge high interest rates. You can also look for secured loans. A loan can be taken against immovable property as security. Or fixed deposits can be kept as security or gold as collateral. By repaying these loans on time, one can improve the credit score.
There are some step-by-step ways to improve your credit score. Make sure to pay installments of existing loans regularly. Ensure that the loan utilization limit ratio of credit cards is less than 30 percent. Avoid applying for loans and cards when you don't need. If any wrong information appears in your report due to the lender's mistake, immediately contact the bank/NBFC. Get it corrected.
