Staying credit worthy
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How is the credit score calculated? What factors affect an individual’s credit score?
Your credit score is calculated based on information in the “Accounts” and “Enquiries” section of the Credit Information Report (CIR).
There are various attributes that go into developing the score:
* Credit Utilisation: How much credit is the consumer using?
* Defaulting: How many accounts are past due — how much and by how many days?
* Number of inquiries: Has the consumer applied for additional credit lines?
* Trade Attributes: How old are this consumer’s lines of credit? What type of credit does he have? Does the consumer have a good mix or balance of credit or is it all credit cards?
What is considered a good credit score by banks?
* Most banks lend to consumers with a score of 750 and above.
* They may also consider other critical factors like income-to-debt ratio, residential status, professional qualifications etc. while deciding on your loan.
* CIBIL, however, does not recommend any cut-off score to banks
How to get inaccuracies corrected in your credit report?
* Purchase your own CIBIL rating and score
* Review the report and identify if there exists inaccuracies
* If you find discrepancies then log in to CIBIL’s dispute resolution webpage:
www.cibil.com/consumer-dispute-resolution
* Provide your name, address, date of birth, report Control Number (CN) and the nature of the dispute
* CIBIL’s dispute resolution department will analyse and route the dispute to lending institutions for confirmation
* The Credit and Information Bureau of India Limited is a repository of information on the credit history of commercial and individual borrowers
* This data enables lenders to measure the credit-worthiness of such borrowers
* Based on one’s credit history, CIBIL calculates a score or an index, that is provided to its members
How to improve your credit score
Below are a few key pointers you should keep in mind if you are to improve your credit score.
* Pay your loan EMIs on time. When you have more than one loan running, it gets difficult to repay them or keep a track of them. So, make regular and timely re-payments of your loan to maintain your credit level
* Never fail to pay the minimum payment on your credit card. It is advisable to make full payments on your credit card every time.
* Do not apply for loans or credit cards if not required, as this would mean more credit exposure. Instead of applying for another loan, try checking for a top-up loan option on your existing loan. This will make your debt burden easier to manage.
* Use some of your savings to repay some of your debt. Always plough back extra income to reduce your debts.
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