Creditworthiness, or the ability to repay debt, is assessed by a person’s credit score.
In most cases, it takes the form of a numerical score that takes into account the borrower’s previous repayments and credit history. The Reserve Bank of India has given approval to four different credit bureaus in India. Companies like Experian, Equifax, Highmark and the Credit Information Bureau (India) Limited.
CIBIL is the most popular credit score in India. CIBIL credit scores range from 300 to 900, with 900 being excellent. The ideal CIBIL credit score is one that is at least 750.
A better credit score is crucial since it offers the following advantages:
1.Get the credit card you can, one that offers a variety of features and benefits.
• Faster Loan Approval – Banks will quickly and easily accept loan applications with a high credit rating.
• Lower interest rates: A person with a high credit score could negotiate lower interest rates on credit cards and loans.
• Loans are getting cheaper – Loans come with processing fees and a host of additional costs.
How can you build your credit score?
1. Stay organized and meet deadlines
An individual must be consistent with paying off debt and meeting payment deadlines. How unpaid debt is handled will have a big effect on how credit score is calculated. Credit rating will be affected in addition to incurring a fine for late payment from EMI. Therefore, if all credit payments are made on time, it would be beneficial to increase one’s CIBIL score.
2. Use credit wisely
Applying for several loans at once can mean that the borrower is stuck in a vicious circle caused by a lack of funds. Avoid taking on a lot of debt at once and use credit wisely. Only a few loans need to be applied for within a certain time frame. It would be wise to pay off one loan before taking out another to prevent the credit rating from dropping.
3. Monitor borrowed credit
Applying for new credit is something that should only be done if the borrower needs the money and has the ability to repay it. It is to our best advantage not to exceed our credit limit, as this may not only result in unnecessary fines and interest charges, but it may also result in a reduction in our credit limit and credit score.
4. Check for credit report inaccuracies
It is important to regularly review our CIBIL score and report any anomalies. On rare occasions, CIBIL may add inaccurate information to our report; this may delay the entry of some items. Possible errors like a repaid loan that was not updated on the credit report, credit activity that was confused with someone else’s, or negative information too old to include cannot that harm us.
5. Build a believable story over time.
The goal is to borrow the right amount, use it correctly, and repay it on time. To keep the EMI low when taking out a loan, one can choose a longer term. It can also increase the credit limit. Having a lot more credit and maintaining a low rate of credit utilization are the keys to improving the credit score.
How can virtual credit help improve credit scores?
Only 4% of Indians have access to credit; for the majority, credit is still not available. A significant portion of the FinTech industry is working on solutions to close this gap and increase everyone’s access to financial well-being. In the following ways, these actors help users to increase their credit ratings:
1. Access to credit for people with no credit history
2. Allow maximum borrowing
3. Simple alternatives for reimbursement
4. Continuous Accounting Statements
5.The paperless trail
The bottom line – If you’re able to learn how to improve your credit score, you’ll be in a better position to reap the potential financial rewards — basically all of the things that generally contribute to our sense of fulfillment.
Disclaimer
The opinions expressed above are those of the author.
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