Knowing your credit score is good for many reasons. You need see how good your credit scores are. So, first step to know your credit score before you go home loan. Credit bureau acts as repository of loan repayment of all borrowers in India. They are set by RBI to inform banks about borrower past lending history.
Difference between Credit Report and Credit Score
There are four bureaus that maintain credit reports. Such as Trans Union, Equifax, High Mark Credit Information Services and Experian. Credit report is create and maintain by Credit Bureaus. They contain detail about your credit history. Credit reports include details like on-time history, missed payments. Such as credit limits and balances, past bankrupt and other details.
Credit score is grade that given to your credit report. Your credit reports details are convert into credit scores. When you apply for home loan. They pull out credit report along with credit score from credit bureaus. See Know your borrowing capacity
How it Works?
Banks has to classify loans to RBI. Like good, bad and non-performing asset (NPA). You must know that when you do not pay any loan for three months. It gets classify as bad and non-performing asset. Sometimes it may flag as defaulter.
These factors increase collection efforts for lender. Apart from good and bad status, credit bureaus also compile and share with lender. Like loan restructure, settlement, write-offs and suit or non-suit file status. This status may reduce of getting loan.
Benefits of good credit history and high credit score
Good credit rating offers you more benefits. There are other parameters beside repayment history. This makes you eligible for home loan. It is important to pay loans on time. If your score is not above 800. Then lender knows that you have missed payment in past.
With good credit you have more financial options and opportunities. Your credit history is most important it will consider when you apply for loan or credit card. So building good credit history makes you to approve for loans. It help you to achieve your financial goals.
Plus, many lenders offer lower interest rates with good credit histories. Thus, you may expect fast disposal of your loan request with less query. Such as less document, non-penetrative verification by lender and with low hassle.
Low Credit Score Loan Services
Loan applicants are expect to have no credit history. In India, Credit Score is very low. If you have never borrow money. Then it does not mean that your application will not process. It will test by lender and lender do extra checks. Which may increase process time?
Further, you may add guarantor with good credit history to your loan application. It increases your credit score. Since, interest rate also has risk return implication. Few lenders may consider your application at high rate.
Also, credit score has no relation with income level of an individual. If you do regular transactions on credit care it can lead to good credit score. To get benefits of high score it is advice to have credit history by availing small loan.
So if you want to apply for home loan. You need to pull out your six months bureau report in advance. And check your score. In case you find any errors you can raise bureau dispute. Check 5 Steps to save money with credit cards
Improve your credit score
Now you know why credit score is important. Let us look into what you can do to improve your score. You must pay your credit dues on time. And you ensure to pay loan EMIs and credit card bills by due date. Your payment history has impact on your CIBIL Score.
You need keep control on credit card limits. Using credit card may not affect your credit score. Total debt reflects on your credit report and impact on your credit score. Having many credit cards and loans increase debt.
If you have many loans you close some of them. So that your total credit exposure is reduce before you apply for new loans. When it comes to loans there are two types of loans. Like secure and UN secure. If you take too many unsecure loans it might be decline your loans. You do not settle loans and credit cards. It will have negative effect on score.
Joint accounts are also part of your credit history. And impact your credit score. Best way to avoid loans and cards are to pay on time. So bad credit score can damage your future credit requirements. Finally, you have to review your credit score and credit history regular. See how to increase credit score. Thus check what credit score I need to buy a car.