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PERSONAL FINANCE
Applying for a loan? Here's how your credit card can be an obstacle
When you apply for a loan or a credit card, the lending institution checks your credit history before deciding to lend to you.
DNA Web Team | Dec 09, 2018, 08:59 AM IST
1.What is a credit score?
Credit score or CIBIL Score is a three-digit numeric summary of your credit history. The score is derived using the credit history found in the CIBIL Report (also known as CIR i.e Credit Information Report). A CIR is an individual's credit payment history across loan types and credit institutions over a period of time.
2.How does a good credit score help?
Today, credit scores are important for not just getting a loan, but even for getting better loan rates. Lenders have been relying on credit scores for fixing the rate in case of personal loans for some time now. Of late, banks have started offering customers with good credit scores better home loan rates too. Lenders that offer preferential pricing in home loans to customers with a good Cibil score are Bank of Baroda, Bank of India and IDBI Bank. Cibil, or Credit Information Bureau (India) Ltd, is country’s oldest credit bureau.
3.How credit score is calculated?
The credit bureau determines a credit score based on your previous credit history, your current debt levels, the amount of time you have had the credit, the types of credit you have available and your pursuit of a new credit. Credit information companies have developed their individual credit scores, which is typically a three-digit number that represents a summary of individuals' credit history and credit rating. This score ranges from 300 to 900, with 900 being the best score. Indiscriminate spending on the credit cards, utilising the large credit limits and being undisciplined about repayment can adversely impact the credit score.
4.How to get the best credit score?
There are three key ways to maintain a good credit score.
Start making a habit of checking your credit history regularly and looking through your credit report
Avoid default on a credit card or a loan instalment since that will negatively impact your credit report and score
A good step in building a credit history is timely payments of your credit card bills and other EMIs
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5.Things you need to keep in mind
Even a single missed payment could spiral into chronic default
A recent loan being repaid consistently has better impact on credit score
700-760The Cibil score above which banks offer cheaper home loans
