How you can improve your credit track record

If any bank or credit-card company rejects your loan and card application citing bad credit score, then applying elsewhere wouldn't help. Each bank has access to your past loan repayment behaviour via database set up by credit bureaus such as Credit Information Bureau India (Cibil), Equifax Credit Information Services, Experian Credit Information Co and CRIF High Mark Credit Information Services.
Every loan or credit card that you own is fed into the systems and is open for subscribing banks to access before offering you more loans. Each time you default on payments, including cheque bounces, they reflect in your credit report.

Based on your repayment history credit bureaus rate you on a scale – 300 to 900 (Cibil TransUnion), 280-850 (Equifax), 330-830 (Experian).

Experts say that a credit score lower than 750-700 isn't considered loan worthy by banks, while select non-banking financial companies might offer to lend to a person if his score is above 650-675. If you are having adverse repayment history then there are ways to mend the situation.

Card payments
Majority of users are at credit risk thanks to negligent credit card payments. Avoiding credit card bill payments completely, paying only the minimum amount due, using up the entire credit limit, opting for cards that offer high credit limit are steps that adversely impact your credit report and score.

Handling disputes
When there are disputes boiling with the credit card company or issuing bank, don't let them simmer on. Raise a dispute such that the dates can be tracked. However, experts advise that it would be in the card holder's interest to pay off the amount as the late-payment charges and interest adding on each month at 2-3% per month would snowball to a higher amount to be taken care off later. You can seek a refund of the amount through proper channels.

Type of loan
Secured loans, where one offers a collateral or property to mortgage, namely home loans, loan against FD, etc help you earn brownie points for your credit history. In contrast, heavy reliance on credit cards and EMIs through credit cards, personal loans would send negative signals through your credit report. A small debt of unsecured loans isn't going to impact adversely. But try to maintain a ratio of 80:20 for secured and unsecured loan respectively.

Multiple loan applications
Avoid applying for loan at every possible bank and for credit cards. This reflects a desperate need to get credit and is considered a negative behaviour by lenders. Have you been wondering how the bank got to know where you have applied for loan? Well, your credit report shows how many hits have been made to check your credit score in a month. Everytime you make a loan or credit card application, the borrower would first look up your credit score. So apply at your own bank, where you have a saving bank account history, await their reply. If negative ask them for the reason and the credit report.

Avoid loan settlement
Even though you are hell bent on getting rid of the outstanding loan, entering into a settlement with the lender or the card company isn't a good decision. When you settle an outstanding of Rs 50,000 by paying a lower amount, you can save on some money, but the lender makes a remark of "Settled" or "Settlement" in your credit report, which reflects badly on your credit behaviour. The score too is impacted.
An escape way can be to negotiate with the lender before making the payment that the settlement remark should not be mentioned in the credit report.

Cards that help you build credit history
First-time borrowers would often have faced a rejection of loan. This isn't because your credit score is bad, but because the bank or lender has no means to base your repayment track record on. When you simply have no credit history at all, there are ways to build it brick by brick. However, one wrong step might force the lender to shift you to the bad-apples basket.

Pay other bills on time
Credit Information companies such as Cibil, Experian and Equifax have been in talks with telecom and insurance companies as well as electricity suppliers seeking payment details by individuals. If they succeed then past payment history of electricity, insurance policies, phone and mobile bills too would be tracked by credit bureaus and the banks would have the data available on other payments. If one isn't serious about paying bills and insurance premium on time, how can the person be expected to clear loans within stipulated time?

Use electronic clearance and auto payment options upto a pre-defined limit to make timely bill payments or set up reminders. If you are making payments by cheques then submit it keeping in mind three working days for clearance.