After completing the education, there are few things that every new comer in the industry wants to achieve. Finding stability in career and achieving your desires are on the top priorities of every young achiever. Their desires include applying for a credit card, buying new car, a new house, furnishing their parent place with all lavish luxuries and many more. Though a car and owning a house is a big dream that might take some years to complete but getting a credit card seems to be very simple and easy thing which they can afford in early years of their career. However, this might be equally challenging. Yes, you read it right! Applying and actually getting the credit card or any other secured or unsecured loan can be tricky, especially when you don’t know about your credit score.
A credit score is a 3 digit number that states your capability to repay the debt. Banks/ NBFC’s and other financial institutions use credit score to decide whether to approve a credit card or any other loan to you or not. There are credit bureaus that keep a track on your past payments and create credit reports based on the same. The credit score generally ranges from 300 – 900 and higher the score higher are your chances to get easy approvals for the loan or a credit card. The credit scores are generally based on how often you make payments, your timely payments and how many accounts you have with a balanced debit and credit amounts. The credit score never get affected due to your personal information like name, gender, caste or religion.
With so many ways available to know your credit score, Mudra Homes provides you the facility to check your credit score for free without affecting it at www.mudrahome.com. Many times your credit score may vary (may be within 6 months) but this information depends on your credit reports. You should keep a track of what is affecting your credit score and how you can improve it.
If you are using your credit card to its maximum limit and not paying the bills on time, you might have not realized that your credit could be affected. The delayed or missed payments of your credit card or the any other amount of debt that you are carrying have a biggest impact on your credit score. You might have question in mind “what’s a big deal with a low credit score?” Since these days lenders judge you through your credit scores, carrying a bad credit can make your life extremely difficult. Read on to know the side effects of bad credit score:
Banks/ NBFC’s and other financial institutions take a risk to a limit. If your credit score is in bad shape they might not be willing to lend you at all. With a poor credit score, you will find your card or loan applications rejected or denied with many financial institutions.
Low credit scores indicate that you might default on your credit card or loan obligation. Low scores means that you are a risky borrower than someone with a better credit score. Borrowing with a low credit score is difficult and if the Bank/ NBFC lend you, they will take a risk by charging you higher rate of interest. If you are approved with a low credit score, you have to pay a higher amount as an interest over the time. Higher the amount of loan, higher is the interest.
Utility companies like electricity, phone and even cable can check your credit score as a part of their application process. Due to bad credit history, the utility companies might ask you to pay a security deposit to provide you with the services. Even to extend your services they want to be assured how reliable you are with your payments. If you want to buy your phone through EMI’s then also you have to pay more amounts upfront because of bad credit score.
Certain jobs, especially in the management or financial industry, require you to have a good credit history. You can be turned down for the job because of low credit score or negative marks in your credit report, especially with high debts, bankruptcy, outstanding bills etc. It is important to know that employers refer to the credit report and not the credit score. They want to be sure that the negative marks of your credit report will not affect your performance.
Yes! Insurance companies check your credit score too. They argue that the insurance borrowers with low credit score are linked with higher claims. To avoid such scenarios they charge you with higher insurance premiums, regardless of the number of claims filed in past years.
In metro cities, many landlords check credit before the approval for the rented apartment. Your low credit score reflects that you will not be able to pay your rents on time and for that matter if you find a landlord who can rent you an apartment with a bad credit score, you may have to pay high security deposit.
Banks check your credit score before approving for your car loan. Moving with a bad credit score might deny your car loan application or you might have to pay higher rate of interest, which in turn leads to higher amount of EMI’s.
A startup venture need funds and a bad credit can limit the amount that you can borrow to start your business. Even if your business plan is extraordinary, that might not help to arrange for the required funds.
Working out to improve your credit score is like working out in gym and losing weight. It takes some time and there is no quick fix way to improve it. To set off all the above points from disturbing your financial life you need to focus on the following points that can help & guide you to improve your credit score:
Keep a track on your credit score and keep reviewing it regularly to know where you are lacking and where you need to improvise your credit score. Always keep an updated list of to do points to improve and what all points need improvement to improve the credit score. You can always use your credit report to make a list of all your accounts and checking through online statements how much you owe on each account and what rate of interest you are paying for the same.
Look and analyze your credit report closely. Create a plan to finish your smaller debts at earliest. You can also borrow a loan and consolidate your small loans into one and pay a single EMI. Though it is easier to say than done, but reducing the amount that you owe will give more satisfactory feeling than improving your credit score. Create a payment plan that can utilize your available budget for highest interest charging debts while maintaining minimum payments on your other accounts.
Start noting your due dates for each and every bill and EMI that you have to pay. Delayed payments impact your credit score negatively and it becomes more difficult to cover up then. The longer you pay your bills on time, older credit problems count for less. The impact of past credit problems on your credit score fades as the time passes and recent good payment pattern start showing up in your credit report. Good credit scores always weigh more than the credit problems and give the positive information that says that your are managing your finances well.
Collection account refers to the accounts where you were unable to repay the debts and with a mutual understand you and the lender settled the amount with the minimum payment. In any case, if you have been into such scenario it’s better for you to work out on such accounts and clear the account by paying the dues to the company. Beware that paying off any collection account will not remove it from your credit report instantly, rather it will stay for 7 years on your report.
Make sure that once you start moving towards improvisation of your credit score you cannot look back. Once you develop your habit of paying regularly, do not let any situation create any hurdle. You should give more priority towards your home loan instead of other payments as the other payments can be postponed on the basis of your personal relationship whereas EMI’s towards your loan can not be postponed.
Always keep your credit card any other revolving credit balances as low as possible. Higher outstanding amount will affect your credit score adversely. The best way to improve your credit score is by paying your revolving debts on time. In fact, owing the same amount but from fewer account will also lower your scores. Don’t close your unused cards and don’t open new cards that you don’t need as a short term strategy to improve your scores.
Fixing your credit report means fixing errors in your credit history. Credit score repair starts with your credit report. If any mistakes exist, follow the above guidelines to maintain a persistent good credit history. It takes lots and lots of patience to rebuild a credit history from a poor mark. Keep a check while you check your credit score too. It is always OK to request and check your own credit report. Your score will not be affected as long as you directly call your credit report from the reporting agency or through an authorized organization that provide credit reports to the customer like Mudra Homes.