Top 9 FAQs about Credit Score in 2021
Feb 12,2021 Borrowing, CIBIL Score, Loan, Personal Loan, Digital Loan, Online Borrowing
- How can I improve my CIBIL Score?
You can improve your CIBIL Score by maintaining a good credit history, which is important for loan approvals by lenders. Follow these steps to better your score:
a. Pay all overdue: It is extremely important to pay your debts on time. This affects approx. 35% of your credit score. Pay on time, all the time. Your credit scores can be considerably impacted with just one late payment reported to your credit file.
b. Pay down balances: If at present you have multiple credit cards and are using more than 30% of your credit limit then you want to follow this advice. Pay off high balances to stay under 30% credit limit and maintain a low balance. This component alone is the second biggest impact to your score, approx. 30% of your credit score.
c. Pay all EMI's regularly: Use autopayment option to pay the EMI's every month and your scores should continue to improve with healthy, responsible activity.
d. Check your credit report: It is available FREE once a year from Credit Bureaus likes CIBIL, Experian, and CRIF etc. Complete a systematic review of your credit report. You can get a free copy of your credit report from each bureau once a year. Look for errors in balances, payment history, and questionable collections.
- How often should I have to check the Credit Report?
Checking your Credit Score or pulling your Credit report does not impact your credit score. As a practice, it is good to your check your credit report at least twice a year. It is recommended to check your credit score before you apply for a new credit / loan product, so you can be sure of your chances of approval.
- Why is my Credit Score critical for getting a new loan / credit product?
The Credit Score plays an important role in the loan application process. After an applicant request and submits the loan application form, the lender will first check the Credit Score. The Credit Score works as a first impression of "credit worthiness" for the lender, it also indicates the potential and ability to pay of the customer i.e. If the Credit Score is low, the lender may not consider your loan application further and reject it and higher the score, the better are your chances of the loan application being assessed and approved.
- Who can see my Credit Report?
Your credit report is not available to the public and can be accessed only with your permission. When you apply for a loan then your consent is required as the lenders and banks need to scrutinize the information to determine your creditworthiness and your potential and ability to pay back the borrowed amount.
- What are the factors that can impact Credit Scores?
The two most critical factors that affect your Credit score are as follows:
a. your repayment of the loan and how timely you pay your EMI's. If you are 30+ days late in paying your dues, then your Credit score might drop by certain points.
b. Credit inquiries which can affect your Credit score in a major way. There are two types of Credit inquiries, soft and hard. Soft Inquiries are harmless to your Credit score but the hard inquiries that are often done by lenders before lending money to you can bring a change in your Credit score even if you do not get the loan in the end. Taking new loans can also affect but it can be fixed with regular and timely repayments. Lenders estimate the credibility of the borrower at their own prudence. They may use whichever scores they would like and measure those scores on a scale that is unique to them. It is also possible that they may not even consider Credit scores at all but just the contents of the Credit report.
- If I have a good Credit Score, will I get a loan with low interest rates?
Although lenders look at your Credit Score before considering your loan application, they also look at several other factors too, such as your monthly income, employment history, fix investments and so on. But you can be rest assured that if your Credit Score is good, the chances of loan refusal are low, and you will get better rates than someone with just an average score.
- Can Credit Bureau delete or modify my records?
Credit Bureaus cannot delete or change records reflecting on your Credit Reports on its own; they basically collect records of individuals provided to them by their members (Banks and NBFCs.
- How long does a low credit rating last?
Debts/loans have a fixed duration, and adverse information that appears on your credit report. All adverse information on the credit information after 7 years often start to value less for the credit score. Make sure your repayments and your credit related activities are timely and regular to show permanence in your credit behaviour and ultimately pushing your credit score towards the good side.
- If I am new to credit then what will be my Credit Score?
If you have never taken a loan till date, then you will not have any credit history to show. Your Credit Score will be low i.e. 0 or 1. Lenders are usually quite anxious about lending large amount to credit newbies as there is no way for them to determine their credit behaviour. Having a credit history is extremely helpful for your future.