Applying for a Home Loan? Improve your Credit Score

A credit score is a number that determines someone’s creditworthiness. The higher the score, the better the borrower looks interested in lending money. A credit score is built based on credit history that accounts for the number of open accounts, total amount of debt, repayment history. 

Credit cards and loans play an essential role in people’s lives today. The credit score is a crucial factor to notice and measure while getting access to credit. It is a three-digit numeric summary of a consumer’s credit history and a reflection of the person’s credit profile. The credit score depends on past credit behaviour, such as borrowing and repayment habits.

A credit score is essential when someone has to borrow a more significant amount because the chances to repay depending on the credit score. 

People with lower credit scores are generally considered as risky borrowers, and so they are charged higher interest rates on their loans than any conventional borrower because people with lower credit scores bring the risk for the lenders. Higher scores represent better credit decisions and give any bank or lender more confidence about the repayment of the loan. That’s why they are charged regular interest on their loans. A good credit score opens access to bigger and quick loans. 

How to Improve Credit Score?

Credit score, also known as CIBIL score is a three-digit number which needs to be maintained to get access to loans of more significant amounts like house loans, car loans or any other loan. Some easy financial habits can quickly improve the credit score. 

 

1. Regular review of credit report for accuracy: It’s essential to make sure that all details recorded on the credit report are correct. Any mistake that reflects on the credit report can negatively affect the credit score. 
2. Pay dues on time: Consistent, timely payments can raise the credit score. One missed, or late payment can hurt credit score. 
3. Fix credit utilization ratio: If the credit card balance exceeds 30% of the credit limit every month, it will affect the credit score negatively as it puts a negative impression on the credit report. So, it’s essential to keep a cap on the credit expenses every month. 
4. Maintain a credit budget: Credit should be used wisely. It’s essential to take any loan or credit of an amount that can be repaid in future. Everyone knows their capabilities and how much their income can go, so in this case, even the credit card should be used with some thoughts. 
5. Build up a healthy credit age: A right credit age on average should be more than  three years. It is essential to have a proper credit age with an excellent, timely repayment history to improve credit score. 
6. Avoid multiple credit card applications: every time a new credit card application goes from any user, the credit report and credit score is checked. Multiple credit card applications in a short period can make one less creditworthy, and negatively impact the credit score. 

Benefits of a good credit score  

It’s not that one cannot survive without good credit, but it’s essential to have good credit if one wants to have a future with easy access to credit. Other than this, few other benefits can come with a good credit score. 

• Low-interest rates on credit cards and loans or mortgages 
• Quicker and better chance of loan or credit card approval
• More negotiating power  
• Comfortable support for higher credit limits 
• Easy support for home loans 
• Better car insurance rates
• Avoid security deposits on utilities

Home loans which need a massive amount become more comfortable and quicker if the credit score is good, i.e., 750 or above. The primary key to keep a good credit score with the help of a credit card is to keep them active and pay bills on time, with the low outstanding balance.    

 

Can a Credit Card Improve Your Credit Score?

 

 

Using a Credit Card can have either of  positive and negative effects. They may have the power to bury you under the pressure of immense debts, but they can also create wonders in your life by potentially improving both the credit report and credit score. But that can only happen if the dues incurred from credit cards are cleared at the time. If they are not paid handsomely and in time, then they will not only make the credit score worse but also put one under the pressure of debts. 

Credit scores are essential decision-making tools that lenders use while lending money to understanding how likely the person will repay the loan. A good credit score opens access to bigger loans. 

Having a credit card is a responsibility. So people having credit cards have to be conscious when they are using credit cards and why they are using the credit cards. They should swipe their credit cards to only make those purchases that they can afford to pay later in the given timeline. Most importantly, one has to be mindful of how having credit cards can impact their credit score. Everything they do with their credit card can affect their credit score - from applying for a credit card to using the credit card - and even how they are using the credit cards - or how many credit cards they already have. 

Ways to Improve your Credit Score with Credit Cards?

For people who own one or more than one credit cards, they should most importantly know ways to improve your credit score with the help of credit cards.

1. Credit Limit & Balance Information: Most of the credit cards have a credit limit, which is the maximum credit or the maximum amount, the credit card issuer has made available to you. Using all the credit cards at once lowers the credit cards and makes the person a risky borrower with less creditworthiness. Many credit card issuers report a ‘high balance’, i.e., the highest balance ever charged on the user’s credit card. That’s why, even if the user reached the highest credit limit but paid that off soon in the given timeline, still the high balance will reflect in the credit report affecting the credit score. It’s always safer to keep the card balance below 30% of the credit limit, instead of exhausting all the credit limit and reaching the highest balance.
2. Monthly Credit Card Payments: The last credit card payment amount is always listed on the credit report itself. Even though the credit amount directly influences the credit score. Quick and timely payments can reduce the credit balance faster and will improve the credit score. The timeliness of credit card payments is one of the most critical factors that can influence the credit score. Credit card payments at the right time can boost the credit score, while late overdue payments can reduce the credit score and reflect less creditworthiness. In case of late payments, there’s another disadvantage that a late payment fee adds up to the already due credit balance. But your credit score can be safe only if you pay the credit card bills every month, i.e., in the 30-days time limit. Just like an electricity bill or phone bill comes every month and the credit card bill also comes every month with a due date and has to be paid before the due date only if you want to keep a good credit score.
3. Credit Card Applications: Each time someone applies for a new credit card, the details get added to their credit report. Rejections of credit card application have a negative  impact on credit score. Putting several credit card applications in a short amount of time shows the desperation for external funds and makes you a risky borrower . For this reason, it’s best to avoid applying for too many   credit card applications in a short span of time.. 
4. Several Credit Cards: Having too many credit cards can affect your credit score. There’s no exact limit of possessing credit cards, but too many can affect the credit score.  
   
   
    

Other than all these factors, if the person doesn’t have a credit card at all, if that can affect the credit score negatively. So it’s always essential to have one credit card at least which should be appropriately maintained. 

Final Words

The longer one can keep maintaining credit cards correctly, the better it is for their credit score. It’s always good to use the credit cards responsibly and keep the credit utilisation within 30% of the credit limit to maintain a good credit score. But also one should make sure they pay their bills timely and swipe the card only to make those purchases that are affordable for them. The key to keeping a good credit score with the help of a credit card is to keep them active and pay bills on time, with a low outstanding balance.    

 

The Key Highlights of The Finance Act 2020

"Everything that the Government does and aims to do is for this pyaara vatan (beloved country)."

I think our “pyaara vatan” has gotten a habit of pulled back by the government every time it falls into a pit dug on its own, which is why our finance minister’s not so luring fiscal act couldn’t help in stimulating the market and economy all together. A few of the major key highlights are mentioned below:

Taxation:

• A new tax slab has been introduced which can opt only by giving up all the exemptions and deductions, for which around 70 deductions and exemptions of income tax has been removed out of 100, which is clearly one and the same thing for the common people but a great advantage for huge businesses in India.

• The abolition of DDT(dividend distribution tax) for the company has also been a major change, which again might not be directly passed on to the consumer section but a huge advantage to major companies.

• Cooperative societies tax has been reduced to 22% from 30%, “vivaad se vishwaas” scheme has been launched as new direct tax dispute settlement scheme, adhaar based verification of taxpayers will be introduced and online allotment of PAN on the basis of ADHAAR is also being introduced to ease the process.

Investment & Insurance:

• One of the major decisions of selling LIC(Life Insurance Corporations) government holdings through initial public offer also comes as a disappointment to people.

• The corporate bond limit for FPIs has been raised to 15% from 9% which might be a bit helpful for FPIs to invest which has been made difficult since the last budget.

• The government also doubles the disinvestment target by Rs 2.1 lakh crore for the next fiscal year

• The insurance coverage deposit has been increased to Rs 5lakhs from Rs 1lakh.

Indirect tax

• Footwear and furniture goods custom duty has been raised to 35% and 25% respectively from 25% and 20%, excise duty on cigarettes and tobacco products too has been proposed to be raised.

Telecom, tourism, and Infrastructure

• BharatNet program has been allotted 6000crore to digitalize rural India, five archaeological sites in Haryana, UP, Assam, Gujarat, Tamil Nadu are to be developed for the world-class museum. Five more smart cities are to be set by the PPP model, a target of setting up 100 airports by 2024.

Healthcare& Sanitisation

• The Healthcare sector has been allocated around Rs 69000 crore which is 1% of the total GDP, viability gap funding window to be opened to cover hospitals especially for the places which do not have hospitals already impaneled under Ayushman Bharat.

• Water sanitization and pipeline projects have been allotted Rs 3.6 lakh crore and Rs 12300crore for Swachh Bharat.

Agriculture

• Agriculture which contributes 70% of our economy has not been rewarded with many incentives except expanding PM KUSUM scheme to 20 lakh farmers, railways too to be set up for transportation of goods for farmers via PPP model.

What we expected mostly played out – no fiscal stimulus due to constrained fiscal space, relatively higher focus on infra, nothing for real estate, no incremental gains for rural, reliance on strategic disinvestment /lesser on ETF, bond CPSE to include G-secs, nominal income tax sops. Continuity was seen across policies – attracting foreign capital, deepening of bond markets, and raising tax compliance.

Government spending has been key growth support for many years and is likely to remain as such in FY21 too. The equity market was disappointed with a lack of substantial income tax cuts and fear of lower financial savings in case of exemption removal in the long run.

Benefits to check cibil score

Your credit score is aggregated from the data provided within the credit
report. It’s the result of your credit behaviour. The lenders sporadically
pass on your credit data to the credit bureaus. As human work is involved whereas coverage the credit information, the probabilities square measure high for errors to occur. Your credit report is one of the major factors that helps you to improve cibil score. 

Once there's a slip, it will even be associated with any one of the criteria that have an effect on your credit score. Because the credit score is that the metric for evaluating your trustiness, it's vital to stay a check on that.

A small drop will value you lakhs of rupees in terms of increase in the interest rate on high-ticket loans. This reason is quite enough why one must regularly monitor the credit score.

Keeping Tabs on Your Credit Score with the technological advancements, observance your credit score is simple and can be done at a free of value. Following square measure a number of the ways in which victimization which you can check cibil score.

Get your credit report: As per RBI’s instruction, every agency ought to give base level credit information report to their customers once in an exceedingly year at a free of value. Reviewing your credit report can assist you to perceive your credit activities and payment records. You’ll be able to verify them and lift a dispute with the loaner if there's any error on that. By doing this, you can keep an eye fixed on your credit score.

Financial statements: If you're a credit card holder, you may be receiving a monthly statement that contains your disbursal list. Keep an everyday check on the statement so it'll assist you to maintain a coffee credit utilisation magnitude relation on your card. This successively protects your credit score from dropping.

Similarly, get your bank statements and verify if your loan repayments square measure done on-time. If there's any couple in terms payment, you'll be able to raise it with the loaner at the earliest.

Free Alerts: There square measure numerous third party monetary services firms who offer free credit score and credit analysis. You’ll be able to register for such services and find notified if there are any changes made in your credit report. This can give you instant updates on your credit score. Moreover, you can additionally login and check the standing of your credit score anytime.

Credit facilitate India, one in all the pioneering Fintechs in credit score improvement services, provides free credit health analysis for a good vary of shoppers.

Based on the credit profile of the client, the consultants recommend ways in which to improve credit score and recommends suitable credit merchandise. You can also get monthly and quarterly updates on the credit score and account level credit analysis. This might build your credit score monitoring simpler as you get notified instantly.

If the client includes a low credit score, pragmatic solutions square measure recommended improving the trustiness. Breakdown the past outstanding dues square measure easier with the approaches recommended by the team of consultants.

EndNote:

your credit score is that the indicator of your monetary health. It’s as vital as you maintain your physical health. As an award, a healthy cibil score guarantees a wealth of credit offers at terms favourable to you.