How do you can improve / enhance your credit history?
Your credit history, other than your earnings, is the only most important tool used by any Loan provider / supplier to evaluate your application for any type of loan or credit card application. Instinctively, it is very important that you understand your Credit Info Report (CREDIT REPORT) and what it takes to maintain a credit history, so that is optic favourably by Loan providers. A good credit history is maintained by following these simple 7 rules:
- 1 Rule: Always continuously pay your bills on time. Late payments / expenditure are viewed negatively by Loan providers and also may affect the chances of your loan getting approved.
- 2 Rule: Keep your balances low. Whereas the balances on your loans will solely reduce over time as payments are made, you must be diligent about creating timely payments on your credit cards. As well as you should control your utilization. For example, if you have used Rs. 90 thousand out of a credit limit of Rs. 1 lac, this may be viewed negatively by a Loan supplier / provider. It is always prudent to not use overmuch credit.
- 3 Rule: Maintain a healthy mix of credit. Your credit past events should contain a mix of a home loan, auto loan & a couple of credit cards. A high number of just credit cards may have an effect the chances of a loan approval. Why is it so, you may wonder. Though a credit card offers easy access to finance, it is also by far the most-expensive form of credit. Max the number of credit cards with high-utilization, larger are the payments resulting from its high rate of interest.
- 4 Rule: Apply for brand new credit in moderation. If you’ve made many applications for loans, or have recently been sanctioned new credit facilities, a Loan provider is likely to view your application with caution. This ‘Credit Hungry’ behaviour indicates your debt burden is likely to, or has increased and you are less capable of honouring any additional debt.
- 5 Rule: Think two times before closing credit card accounts. Whereas, using credit cards may negatively impact your credit history, un-used credit cards actually indicate that you are financially secure. This makes Loan providers read / view your application more favourably.
- 6 Rule: Monitor your co-signed and joint accounts monthly. In co-signed or jointly held accounts, you are held equally liable for missed payments. This is very important because your joint holder’s negligence could affect your ability to access credit when you want / need it.
- 7 Rule: Review your credit history frequently throughout the yr. Unpleasant surprises in the form of rejected loan applications can be avoided by ensuring that your CREDIT REPORT accurately reflects your current financial status. So reviewing your credit history 3 to 4 times each yr. is imperative.
Though these simple 7 rules are important to keep in mind, each loan provider has its own policies to sanction a loan to an applicant.
It is important to notice that your CIBIL TransUnion Score will begin to increase as you improve your credit history