Increase your Equifax,Experian,CIBIL Credit Score

It’s a common misconception that credit scores cannot be changed or increased. Every financial decision you make and step you take that’s on record, and related in any way to credit, is recorded by Credit Information Companies (CICs) like CIBIL, Equifax, Experian, etc. and this is what determines your score.

A lower score is an indication of irresponsible behaviour with credit. For example – not paying back loans on time, delaying credit card dues by only paying the minimum monthly amount, over-borrowing, over-utilizing credit despite a large income, having an unfavourable credit utilization ratio, etc. All these things can damage your credit score and will be mentioned in your credit report. Negative remarks and lower scores will mean that you won’t be able to get loans approved in the future.

A higher score, on the other hand, is an indication of responsible credit behaviour. For example – meeting all your EMI payments on time, clearing off credit card dues in full before they compound, debt consolidation, low credit utilization ratio, etc. All these favourable practices work towards building your credit score and sustained practice of this type of financial behaviour could even send your score well above 750 or even 800.

How to increase your CIBIL score fast?

Well, the honest answer to this is that there’s no real way to fix your CIBIL score overnight. It will take at least a few months to get the ball rolling in that regard. Three months is the soonest you could expect to see any positive change in your credit score, without making huge lump sum payments to clear off pending loans. In 6 months, you could see a gradual incline in your report, and in a year, you could even change your overall score by a huge margin. That is, of course, if you heed the following suggestions and make the right decisions with your money:

• Use your credit card: This may have been what damaged your score in the first place, but using your credit card in the right way is one of the easiest ways to increase your credit score. Using your credit card right means setting a tiny limit – say 10% of your monthly income – and using the card for recurring purchases up to that amount. Suppose you earn Rs.70,000 per month – use your credit card for Rs.7,000 every month on a recurring expense like groceries or fuel. Using your credit card is basically utilizing credit facilities offered by financial institutions. A small amount like this is easy to clear off on or just before the due date, and won’t hurt your wallet. Consistently clearing off these small-term and small-scale borrowings will reflect positively in your report. This is just step 1, however, but it is absolutely necessary.

• Clear each and every EMI: While the general rule is that you can miss one EMI if you’re in a pinch, but two would result in dire consequences, it’s advisable not to miss any EMI payment for any loan no matter what the reason. People sometimes actively miss EMI payments just to make use of the one month grace period, but don’t realise that it goes on a permanent record. This permanent record is your credit score. Pay all your EMIs as and when they become due, and you won’t have the problem of dealing with penalty interest or a damaged credit score.

• Check and re-check your Credit Information Report (CIR) for errors: The CIR or Credit Information Report generated by CIBIL is not impervious to errors, and since the data collection is largely computerized – it leaves a lot of room for silly errors and mistakes that could negatively impact your score. Take for example the case involving Mr. A Dutta of Mumbai. He purchased a property at a particular address, and his credit score was destroyed after this purchase. Why? Because the previous buyer of that property had defaulted on his home loan, and the address was marked with a red flag. Mr. A Dutta had his credit score damaged through no fault of his, but just because the system implicated Mr. A Dutta thinking that he was the one who defaulted on the home loan. The system reports all the data it has to Credit Information Companies (CICs) like CIBIL, and CIBIL doesn’t have to verify this information before it makes it available to lenders and financial institutions. What matters at the end of the day is what’s written in the report, and if you’re like Mr. A Dutta, you will have to contact CIBIL through their website and report the fact that there is an error in your CIR.

• Make sure you take NOCs (No Objection Certificates) from every lender after you’ve cleared your outstanding dues: Usually when we have some overdue outstanding amounts that we owe to lenders, we arrange for a settlement for a lesser amount than the total owed. While settlements do damage your credit report in a small way, not having a NOC (No Objection Certificate) issued by the lender can have disastrous effects on your score. Most people are just so happy after clearing off their dues that they don’t bother getting this highly important document. The old loan details will appear in your CIR as an open loan that’s not been cleared, but can be removed if you have a NOC as proof.

• Don’t inquire for loans unless you’re sure you want to borrow: Making unnecessary loan inquiries lowers your CIBIL score – yes, that’s true. This harmless act could have serious consequences. Inquire for a loan only when you absolutely need it and when there’s no other way for you to move forward except taking out the loan. This applies for all kinds of loans – home loans, car loans, personal loans, etc. If you are inquiring to find out your eligibility, don’t do so in a formal fashion after approaching the bank – but use any of the loan eligibility and loan EMI calculators available online.
• Pay attention to your Credit Utilization Ratio: Granted, this may not be a term you’re familiar with but you will in the coming months as CIBIL and other CICs become known as the reason people aren’t getting loans. Your Credit Utilization Ratio is the amount of credit you take on as compared to your regular income. Consider the following example: Mr. A earns Rs.70,000 per month, but uses his credit cards up to Rs.50,000 per month and clears off the dues before the due date, and before they gather penalty interest. While this is responsible financial behaviour in the sense that dues are paid off before they’re due – it is also a form of very irresponsible behaviour, as Mr. A would not be able to meet that large payment if his income should stop for whatever reason, for even a month. It is unlikely that he has been able to save enough with his salary to clear off his Rs.50,000 debt in any given month, and it’s obvious that this will remain as an amount owed until he re-establishes his source of income. By which time the same Rs.50,000 would be a far greater amount thanks for penalty interest compounding. Mr. B, on the other hand, has an income of Rs.70,000 but uses his credit card every month for Rs.20,000. This is a considerably smaller amount of Credit Utilization Ratio, and Mr. B would easily be able to clear off any outstanding debt on his card should his income stop for whatever reason. CICs consider the amount of credit taken on versus the earning capacity of the borrower to decide whether they are intelligent and responsible in terms of financial management.

Proving that you are responsible and intelligent when it comes to your finances, and that you can be trusted with credit is what any CIR (Credit Information Report) is all about. It is a document that either instils confidence in the lender that you can repay what you owe, or tells the lender that the chances are high that you may default on your loan.

Clear out the errors and make sure you handle your finances responsibly, and you won’t have any problem with CIBIL, Equifax, or Experian.

The Correlation Between CIBIL Scores, Loans and Credit Cards

Any individual looking to obtain a loan or a credit card from a bank or a financial institution will most certainly need to possess a Good CIBIL score in order to do so. While there are other factors involved in determining whether an individual is eligible for a loan or not, a high CIBIL score is the most important determinant in this day and age. In fact, it is nigh on impossible to acquire a loan or a credit card without a decent CIBIL score to highlight an individual’s creditworthiness.

What Is A CIBIL Score?

A CIBIL score is a numerical representation of an individual’s credit history. Everything from loan and credit payments, bill payments, outstanding dues, etc is reflected in an individual’s CIBIL report, which shows whether he or she is financially stable or not. This is distilled into a numerical representation between 300 – 900 that represents the individual’s CIBIL score. Usually a score of above 750 is considered acceptable by banks and financial institutions to approve a loan or credit card application.

What Can An Individual Do To Improve His or Her CIBIL Score?

There are many ways through which individuals can raise their CIBIL scores in order to acquire a loan or a credit card. Some of the most common ones are as follows:

• Pay off outstanding dues – Individuals with pending or outstanding dues on other loans or credit cards generally have low CIBIL scores. This severely affects their chances of acquiring loans or credit cards from lenders since it is a reflection of poor financial health on the part of the individual. By paying off these dues quickly and consistently, CIBIL scores are positively affected, which in turn prove the individual’s creditworthiness to the lender he or she is approaching. Outstanding credit card dues are generally considered to be one of the main causes of low CIBIL scores. Therefore it is in the individual’s best interest to pay them off as soon as possible.
• Maintain low debt – Individuals with huge debts also have a lower chance of acquiring loans or credit cards due to the detrimental effect it has on their CIBIL scores. Lenders look into the amount of loan debt an applicant has acquired over a period of time, as well as his propensity to pay off the debt. Accumulating debts over a considerable duration negatively affects an individual’s CIBIL score, making it less likely for that individual to be granted a loan or a credit card. By maintaining a low debt balance, customers can keep their head above water even after taking on more loans.
• Make payments consistently – Banks and financial institutions also take into consideration the frequency with which an individual makes repayments towards any other outstanding loans or dues he or she might have. Paying off other debts consistently helps increase an individual’s CIBIL score and acts as proof of the person’s financial health. Lenders are more likely to roll out a loan or credit card to such individuals, safe in the knowledge that the applicant will not default on any of the payments.

Top Credit Card facts for the festive season

The festive season has already hit Indians once again and the market is teeming with offers and discounts across all sectors of the economy. One very important aspect of shopping during festivals is money to pay for. With a host of personal loans and credit card offers making the rounds during festive periods, customers have a lot of paying options to choose from. Banks and other lending entities run special festive offers on credit card spends during such times. However, there are a few facts about these offers that if kept in mind will help you gain maximum out of your credit cards without being tricked into overspending.

• Check your CIBIL report to see its updated

Checking regularly your CIBIL score and report is the best way to keep a track of your credit history. This makes it easy for you to plan your credit and know beforehand your points of improvement. Also, if you apply for credit without checking on your score and in case you get turned down by the lender, then it has a negative impact on the credit report. However, if you check your score before applying, you can improve it if it is poor before applying with any lending entity.

• Credit cards have fees associated with them

It is good practice to find out everything about the related fees and charges for a credit card before availing one. Charges pertaining to credit cards include annual fees, joining charges, supplementary card charges etc. Late payment charges and charges for flexible payment via EMI are other fees that may be applicable to certain credit cards.

• Credit cards let you withdraw cash but that’s expensive

Most credit cards offer you the flexibility to withdraw cash from ATMs. This is true for both domestic and overseas withdrawals. However, taking out cash via credit cards is an expensive transaction and may attract substantial fees and charges. Customers should take utmost care to avoid using their credit card to avail cash unless absolutely unavoidable.

• Swiping your credit card overseas may be expensive

Many credit cards in the Indian market today offer both domestic as well as international applicability. Howevers, cards issued in India may cost you fees when swiped abroad. This is because of two factors, one is the conversion rate that is used to convert foreign currency to Indian Rupee and second is the foreign currency transaction fee that is applicable in cases of these foreign transactions made via your credit card. This fee is generally equivalent to 3.5% of the converted Indian currency amount.

• Credit card reward points are a good bet

Credit cards offer various unique and popular features that can work in your favor. One such feature is the credit card reward point scheme that most credit card providers offer. These reward points are redeemable across a host of online and offline platforms. These can be redeemed to obtain shopping vouchers, gift items, air miles, coupon codes etc. However, in order to make the most of your reward points, it is imperative to know their validity. This will ensure that you do not miss out on the redemption scheme and are able to redeem your points before they lapse or expire. Also, big purchases during the festive season, like those of electronics and furniture, add huge number of reward points that can be redeemed to avail a host of products and services.

• Late payments of credit card bills is to be avoided

Late payments are one of the foremost reasons of customers getting entangled in a vicious circle of credit card debt. Late payments have dual repercussions of one, piled up payments to be made and two, late payment fee added to the original bill amount. This makes it extremely difficult for credit card users to balance in line with their regular monthly budget. Customers who once get caught in this circle of pending credit card payments make huge payments since late payment fee is charged as a percentage of the pending bill and as such accumulates into heft interest amounts.

With the above points in mind, it will no doubt, be easier and more rewarding for you to experience the festivities this Diwali season. Credit cards are a great financial tool to make wise use of and make the most of your purchases. So, happy shopping to you!

Check-up on Your Credit Score in 6 Simple Steps

When one thinks of financial check-ups, the most popular choice that comes to mind is the Credit Information Bureau of India Limited which is also known as CIBIL. CIBIL is the country’s standard format for credit scores and any bank, non-bank financial institution or any other financial institution will check the applicant’s CIBIL score before approving any applications for loans and hence it is imperative that one knows the CIBIL score.

With the New Year, many people set themselves goals of losing weight, being healthy, being fit and giving up vices such as smoking and as important as it is to be healthy and take up healthy habits and keep a check on one’s health, it serves one well if they checked up on their financial health as well. An annual check-up of one’s health is beneficial in many ways and can help diagnose and detect illnesses or anomalies earlier on, similarly financial health check-ups every year will keep your credit score in good stead.

 

 

Any person can be up to date on their CIBIL score by following these six simple steps

1)      Acquire and Fill up the CIBIL score request form online: The first step in acquiring the CIBIL score is to log onto the website of CIBIL and go to the section for applying for the credit score. The direct link to this section for accessing the request form can be reached by clicking on the following link. CIBIL.com/online/credit-score-check.do

2)      Filling in the details: Once the request form has been acquired, the applicant needs to fill in the necessary fields of information. The applicant will have to provide all details requested and the more details provided, the better. The details that are normally required to be filled in include PAN card, Passport details and other identity proof details such as a Driver’s license or Voters ID

3)      Submission of the form and Payment: After the applicant has filled in the form and verified it by entering the anti-spam codes, they are required to click on proceed to payment option which will direct them to the next page. This page will require them to authenticate a payment. The payment for credit score request is Rs 500. This payment can be made through Debit or Credit Cards or through Net banking facilities.

4)      Authentication: This step follows the payment. The system on the authentication page generates a set of questions, usually around 5 that are based on the details submitted and may range from details of the current loans or the details of the applicant’s bank account. A minimum of 3 successful answers should be given for authentication success

5)      Confirmation: The final step is confirmation. Once the confirmation message has been generated by the system, the applicant will receive the CIBIL scores within four business days. Applicants will also receive a payment receipt confirming the payment made towards the request

6)      The authentication fail step is needed only if the 4th step is unsuccessful. In case authentication is unsuccessful, a copy of the payment slip along with self-attested documents need to be sent over to the registered corporate office of CIBIL in Mumbai. Applicants can also reach out on the helpline number for any guidance which is +91-22-61404300.

The payment towards acquiring the CIBIL Score is a meagre amount and the process is relatively hassle free. The online process is convenient and allows applicants to view their credit scores and make sure they are on top of scores that are straying or falling below the desired levels.

Importance of Credit Score

Credit score is an important component of your financial background. Even if you haven’t actively monitored or worked towards building a credit score, you already have one thanks to the dealings with various financial institutions who feed your financial data to CIBIL. CIBIL is responsible for providing credit score or CIBIL score to people.

CIBIL score and CIBIL report are arguably the single-most important component that defines whether you will be receiving any form of credit from a financial institution, be it a credit card or a loan. As such, it is imperative that you actively try to maintain a good credit score by having a good credit history.

Let’s say you have acquired a personal loan, a home loan and a credit card from three different institutions. All the three institutions will be fed to CIBIL, which will then analyse this data and come up with a credit score. Therefore, all your financial data is eventually consolidated by CIBIL so as to provide an outline on your financial background.

What is a credit score?

Your credit score will be a 3 digit number lying between 300 and 900. A high score implies good credit history while a score towards the bottom implies financial mismanagement and unpaid dues in the past and present.

When you are applying for any form of credit, the bank or the lender will approach CIBIL with a request for your CIBIL report and score. CIBIL will then forward a copy of your report to respective authorities.

How do I access my credit report?

You can access your credit report from the bank or lender with whom you have applied for credit. Alternatively, you may directly approach CIBIL and get your report in a few simple steps. You need to fill up and submit the application form, which can be downloaded online. Next, you need to pay the amount for the report through online means. On completing the online authentication process which establishes your identity, you will instantly be given access to your credit report. There’s also the option to complete the authentication process offline once you have emailed all the relevant documents.

Who are allowed access to my credit report?

All credit institutions, financial sector entities and the whole banking industry are allowed by law to access and work with CIBIL to contribute towards and access a person’s credit report. Telecom industries also have access to your CIBIL report and this is mostly used when postpaid connections are applied.

Insurance companies are also allowed access to CIBIL reports of individuals. Brokers or other credit rating agencies can also become CIBIL members and access credit information pertaining to clients. As such, it is no more only about getting loans or credit cards – your CIBIL score will likely imbue itself with all your financial dealings. Therefore, it is advisable to actively work towards building a good credit score so that you are allowed to access the full spectrum of financial services on offer.

 

Homemakers, Pay Attention to Your CIBIL Scores

If you’re a homemaker and spend a lot of time on domestic improvement and maintenance, chances are you haven’t paid too close attention to your CIBIL credit rating. It’s true that you wouldn’t really have had to, given that the breadwinner of the family handles most financial matters. But what if one day the breadwinner is rendered incapable of providing for you and your family, or if the worst comes to pass and she/he is no longer of this world?

Granted, your first concerns won’t be purely financial, but there will come a time when you may feel the pinch of financial insecurity and instability. To combat this, it’s strongly recommended that even homemakers keep an eye on their credit rating from credit information bureaus like CIBIL/Equifax/Experian.

Why is a credit score important?

Well, a good credit score is what all lenders look for in applicants whom they consider lending to. A sub-standard or non-existent score will mean that you can’t get a home loan to renovate your home, and you can’t get an education loan to educate your children. You won’t even be eligible for a credit card to manage household expenses. Although you will definitely need a job or some source of income to pay off EMIs and bills, you may even need a good credit rating to land yourself that job – as employers are looking at credit scores to determine stability and reliability.

How can you, as a homemaker, take steps to improve your credit score?

The simplest way to get started in the process of establishing a decent credit score is to get a credit card, and use it judiciously. Even if you have the cash for a small purchase, use your card and pay it off as soon as you can, before the due date. Never, ever, ever overshoot the due date on a credit card payment, as this will damage your credit rating in a terrible way.

Regular, stable and responsible use of a credit card is a huge indicator of stability and capable financial management, resulting in a constantly growing credit score.

1. Maintaining a savings account in your name, and having an amount of money deposited in it every so often is a good way to survive the financial crunch. When the breadwinner is no longer in the picture, all those deposits will work as a financial cushion to break your fall. Savings accounts earn good amounts of interest and are instantly liquefiable. Also, as an added bonus, a savings bank account in a particular bank will increase the chances of you getting a credit card from that bank, as they know all your details and have details about your financial status. The same credit card can then be used to improve your credit score.
2. Stand as co-applicant or guarantor on the breadwinner’s loans and make sure he/she pays off EMIs as and when they become due, and make sure your better half doesn’t default on the loan in any way. Standing as a guarantor makes you just as responsible for honouring the loan, and a successful repayment of the loan will improve your CIBIL score by a sizeable amount.
3. Co-applying for a loan with your spouse is a good way to make sure both credit scores go up, if you pay your loan back diligently and don’t default in any way. It is also a good way to secure a far greater loan amount than you would have received with a regular single-applicant loan, and on better terms, as the lender will be far more confident in recovering the debt with two responsible adults working towards paying it off.

Don’t underestimate the value of a good CIBIL score as it’s a direct indication of your creditworthiness and ability to manage finances and debt. Taking a loan to secure your future in the future may depend entirely on this, and no matter what, make sure that the EMIs on any loan you take (with or without a primary family earner) can be paid off on the income you currently generate.

A regular income will enable you to manage a household as you once had, but when huge expenditures like college tuition for your children or emergency medical expenses befall you, a loan may be your only option for large sums of money, quick. Ensure your CIBIL score is up to the mark to ensure that you’ll always be eligible for credit – and always have something to fall back on.

CIBIL to Incorporate Utility Bill Payment in Your Credit History

CIBIL is the apex credit bureau of the country. CIBIL stands for Credit Information Bureau India Limited. CIBIL does the task of collating customer’s’ credit history and then evaluating customer’s’ credit score based on their credit history. Apart from the credit score, CIBIL also furnishes credit report for individuals and companies. These reports are the first point of reference for banks and lending institutions for checking the creditworthiness of any customer who seeks to apply for any kind of loan.

Credit report of any individual or company plays a huge role in determining loan eligibility and credit sanction process. However, in case there is a discrepancy in your credit report, then chances of obtaining credit can be ruined to a great extent. While maintaining a good credit history is in itself a challenge owing to small oversights in bill payment creating deep dents in credit reports, CIBIL is now further mulling to include utility bill payment history too.

How will CIBIL include payment history in credit report?

Before sanctioning loan to customers, banks check their credit report and history. Currently, this history includes only credit related repayments like loan and credit card payments. However, efforts are on to include not just loan and credit card bill payments but also phone bill payments, insurance premium payments and utility bills to calculate the creditworthiness of an individual. In order to expand the scope of credit history, Credit Information Companies are in talks with telecom operators as well as the election commission of India to obtain access to their database.

If everything goes on smoothly then in the near future CIBIL will have not just credit information but also postpaid bill payment history included in the credit reports. Most telecom companies in India are members of CIBIL and are using data, however, customer data is not being shared by these companies with CIBIL.

Current functioning of CICs in India

Currently, when information about an individual is sought by any user, it gets only information provided to the CIC by its member. This does not include non-member related credit history which the client would have had with the non-member. The move to include more customer data on payment history stems from recommendation by a committee set up by RBI. The committee led by HDFC Bank managing director noted that India ranks 28th in the list of “getting credit” by the World Bank.

Report by this committee pointed out that India has very low coverage by credit bureaus that cover just 19.8 per cent of adult population as against 100 per cent in various other countries. The report also noted that there is low penetration of financial services in the country and that credit information business in the country can still be improved to a great extent.

Quite recently. CIBIL was also roped in by the government to help track death insurance claims made by customers. With a huge database of customer information, CIBIL has become the apex organization to furnish data which can be used to study and track customer behavior, and to furnish insights that can be leveraged to ensure better credit information business.

How is credit history and credit score important?

The first thing that banks check upon before accepting your loan application is your credit history. CIBIL rates credit scores of individuals between the range of 300-900. Any score that is greater than 750 is considered ideal for obtaining credit. In short, your credit score and history are pointers to your repayment pattern. Since, non-performing loans are a huge liability for any lending organization, credit reports come across as convenient tools that lend insight into payment behavior of customers and thus, help banks reduce cases of loan default.

Measures to increase credit score

While credit scores above 750 are good and healthy, anything below this calls for trouble. Customers can check their credit scores before applying for credit with any bank. For customers who have poor credit scores, following are some of the steps that can help improve it.

• Timely payment of credit card and utility bills
• Minimize the number of credit channels availed. If required, get a loan to consolidate all your debt into one single channel
• Use credit cards wisely so as to avoid overspending which may result in delayed payments and an affected credit history
• Have a mix of secured and unsecured debt in your financial portfolio
• Get your credit report and check if all the information being displayed on it is correct and current
• Do not apply for credit with too many banks

CIBIL is just a collator of your credit information. It does not make changes to your credit history and as such the onus to improve your credit score lies in your own hands.

Best Reasons to Use Credit Card | Credit Score

Financial experts keep telling that the credit card could land you in trouble and it will hurt your Credit Score. It is true that reckless use of credit card can lead to debt trap and bring down your CIBIL score immensely, but there are benefits of using credit cards as well. The benefits being:

 

• Accepted universally:

It is easier to use a credit card when you are travelling as it is universally accepted when compared to debit card or cash. If you are in a foreign country and want to book a hotel room or rent a car, credit card will come to your aid. Debit card might be safe for you to use in your domestic country for domestic use, but to use it in a foreign country it is definitely not so safe.

• Enjoy grace periods to make payments:

The benefit of making a purchase using credit card is that you do not have to pay instant cash. The practice that you must follow is to make the payments well within the time frame given to you so that you can hold on to the cash in your savings account and also access credit at your convenience for no extra cost. Apart from the billing cycle, you are also given a grace period to pay the outstanding balance without having to pay any extra fee. The time frame is usually 15- 20 days depending on the credit card issuer. If you judiciously use the billing cycle and the grace period, your CIBIL score will not be harmed.

• Save on air travel:

Debit cards do not offer as many benefits as they are an extension of your savings account. However, credit cards on the other hand does offer you benefits if you have a CIBIL score of  750 or above. If you are a frequent flyer, then you can opt for a co-branded credit card with a particular airlines that you regularly fly with. This will give you a sign up bonus of a good number of travel miles and will save you a lot of money on air travel. If you have chosen the right cards, you might get one or two free flights in a month depending on the sign up bonus and other points that you have accumulated in your travels. Some cards offer you points that can be redeemed for gift cards or freebies.

• Cash back schemes:

Most of the e-commerce websites have major tie-ups with the major banks and offer anywhere between 1-5 percent cash back on most of the purchases. This will help you save quite a lot when you are shopping online.

• Earn reward points:

Reward points are the best way to make the best way to avail more benefits from your credit card. If there is no use of those reward points, then stock them up and you can use them to avail hefty discounts on flight tickets or hotel bookings when you wish to go on a vacation.

• You won’t have shortage of personal funds:

Online frauds are not uncommon and when you use your debit card to make payments online, there is a potential for fraud. Credit cards are safer than compared to your debit cards. By the time you realise that your debit card is being used fraudulently, you would’ve lost a lot of money by that time and you will fall short of personal fund. Credit card transactions will send you a notification at all times and you can immediately inform your issuer to stop the transaction.

Though there are benefits of using credit cards, reckless usage will land you in a lot of trouble and you will have a poor CIBIL score that may not give you access to credit in the future. So, use your credit card wisely and enjoy all the benefits that it has to offer.

Know what’s on your credit report | Credit Score

It is of utmost important to know what is on your credit report. Supposedly, you are in a huge financial problem and you have limited cash flow, at that time you need to choose which bills are to be paid first that month. You must always pay off the bills that affect your credit the most. This should not be a reason for you to miss out on certain payments. But in situations such as an illness, death in the family or loss of employment, you will have to make a choice on which bills need to be taken care of first. It is a sign of relief that the credit report doesn’t take into account the bills like rent, water, phone, cable and taxes don’t affect the credit score right away. But, if these bills are unpaid for a consecutive months, then they will be sent for collection.

          The collection companies find and collect the outstanding debts and provide services on behalf of the lenders and the banks. So, when the bill is with the collection company, it will immediately register a black mark on your credit report. The collection will show up under the public records portion of the credit report. This section records information on bankruptcy, consumer proposals and the other big negative hits on your credit. The public record including the collections will hurt your credit. The payment of collection will not remove the damage that it has done as the collection record will stay on your credit report for six years from the time it was first registered.

Most times people do not even realise that they have collections recorded in their credit report and they only find out when they are applying for a credit financing. This will further make it impossible for you acquire the loan or the lender will give it to you for a really high interest rate or fees. But the lender will want confirmation that the collection is paid off before lending you any money. The easiest way to confirm that the payment is made is by receiving the confirmation letter stating that the amount is settled in full and the account balance is now zero. Make sure to keep the confirmation letter with you for at least the next six years as collections will come back on your report even after you have made the payments.

Apart from that the lenders check for your payment history, company profile, EMI to income ratio and the written off cases reported in the Credit Information Report. The EMI to income ratio is another important factor. If your EMI is more than 50% of your monthly salary, then the chances of you getting a loan is slim. The best thing to do is check your credit report annually and see how you can improve your credit score and credit history. And look out for the public records portion in your credit report before you apply for a huge loan.