Hyderabad: It is well known that banks and financial institutions give more importance to credit scores over other things. An individual with a 750 score stands a good chance to fulfil his dreams. With proper planning, it can be achieved, not as difficult as it is made out to be. Timely payment of credit card bills is one of the key factors, albeit it is practically difficult sometimes. Due to various reasons, there could be delays in remitting EMIs, credit card bills and the pandemic could be one of the reasons.
If the credit score of an individual is below the 700 mark, there are more possibilities for banks and institutions to decline his/her loan application. Even if they sanction a loan, banks could be charging more interest rates, which cannot be avoided. Factoring in all these issues, it becomes a challenge to avail of a loan with a lower credit score.
Settlement is loss-inherent...
Non-payment of a loan could dent the credit score rating of an individual. If the payee doesn't remit EMI for three months continuously, banks could mark the loan as NPA (Non-Performing Asset). If the remittances are discontinued altogether, banks would term it as default and begin to make plans to recover the total loan amount. This is called the 'Settlement' option.
If the agreed amount is repaid, banks would write off the loan. The banks will inform the same to Credit Boards as well. Subsequently, banks will think twice before granting a loan after seeing 'settlement' towards the loan on the credit report of an individual. Hence, it will affect an individual in the long run. If somebody has already chosen a settlement option, it is better to clear the complete loan amount. Then the clause will be altered from 'settlement' to 'close' and could lead to a hike in credit score.
Delayed payment
If EMIs are delayed, it would impact the credit score by more than 100 points. To keep the credit score intact, it is better to remit EMIs before time. If there is a financial crunch, an individual has to clear the minimum amount of credit card within the specified time. Thereafter, it is better to clear the remaining loan amount. If the bill is high, banks believe that the individual has used his full credit limit. They will note down the delay in payments, but they would avoid mentioning the reasons behind the same. Banks aren't worried about an individual losing a job or sudden expenses due to illness.
At least once a month...
Individuals who have availed of loans, have to keep checking their credit score at least once a month. Many websites are offering this service free of cost. However, picking a reliable website is key. If any discrepancies are found, it is good to inform the banks about the same. Personally check the credit score, before applying for a loan. If there is less possibility of getting a new loan, try to pledge gold or fixed deposit against the loan. Also, it is good to cut down on the usage of credit cards since financial discipline is paramount. Only then, an individual's credit score could be pegged at 750 and above, says Adhil Shetty, CEO, BankBazaar.com
Read: Home Loan: Things to do when you are not able to pay EMIs
