Hyderabad: Loan repayment history is vital for a good credit score as you will be offered new loans and can get concessions on interest if your credit score is above 750. Many people lower their credit score with minor mistakes. See what precautions can be taken to avoid such a situation.
Credit score range
Banks will give preference to those whose credit score exceeds 750. This is not so difficult to achieve. All you have to do is pay the installments and credit card bills on time. In reality, it is not so easy to follow as you may delay payment of EMIs and credit card bills for various reasons, including the pandemic, as it created financial hardships for many. If a person has a score of less than 700, creditors are more likely to reject his/her application. Sometimes even they grant there are chances of charging high-interest rates. So, borrowing is a big challenge when you have a low credit score.
Loss with ‘settlement’...
Non-repayment of loans can have a negative impact on a person’s credit score. If the borrower does not pay the installments for three consecutive months, banks will treat it as a non-performing asset (NPA). They will try to cancel the loan for some amount assuming it as the default if the payments were stopped completely. This is called a 'settlement'.
If the agreed amount is paid, the loan will be completely cancelled. Banks report this to credit bureaus. Therefore, the loans are termed as 'settled'. Banks may not offer new loans when the term 'settlement' term appears in the credit report. This can damage your credit report track record in the long run. If you have already 'settled' your debt, if possible try to repay it in full. This will enhance your credit score as your loan will be 'closed' from 'settled'.
If you pay late...
If you pay the installments late even for a month credit score will be affected by more than 100 points. In order to get a good credit score, all payments must be made before the due date. If you can not afford it, pay the minimum amount for credit cards on time and the remaining later. If the bill is high, banks will assume that you are overusing your card credit limit. The banks will see only credit reports and they won't consider reasons for the delay due to illness or job loss. Therefore, you think twice before spending in order to keep your credit score good.
More applications...
Credit bureaus will know if you apply for a new loan or credit card if your applications are rejected time and again by banks that will lower your credit score. Hence, banks may not want to offer loans to you. When an application is rejected you need to know the reasons for it. An effort should be made to correct them. After that, you have to send a fresh application.
Borrowers should check their credit scores on a monthly basis. Many websites now offer this credit report for free. Choose a trusted website for this. Inform the bank immediately if you notice any discrepancies. Examine the credit report yourself before taking a loan. If it is not possible for you to take a new loan, then put your gold and fixed deposits as a guarantee to get a loan. However, if you want to get loans without any problems, reduce your credit card usage, as a financial discipline is very much needed, only then your credit score will again exceed 750 points, points out Adhil Shetty, CEO, Bankbazaar.com
