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Many of you will agree on the fact that with rise in popularity of credit cards nowadays, it would be easy to know their importance in day-to-day life. In addition to this, with credit cards come the credit score which actually plays an imperative role in the success of financial planning. When it comes to financial planning, it would not be wrong to say that it is highly effective only if, one is able to properly use the available resources up to optimum level.
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Yes, because only one source of income is not enough today to fulfill the funding requirement. Thus, you have to look out the alternatives for credit. And, for that you need to maintain a good credit score so that banks or other lenders can trust you by keeping the risk factor away. If you have a good credit score, you will be able to get the funding at reasonable rates.
So let’s take a look below and try to understand this thing in detail.
Table of Contents
What credit score stands for and why it is important?
A credit score is nothing but a 3 digit numeric value that usually ranges between 300 to 900. Depending on the past credit history for a person, the higher or lower credit score is being assigned to him/her by different available lenders.
If a person is having the high credit score, he/she has maximum chances of availing the credit because lenders will consider this profile at lower risk, and will be more comfortable to process his application. While on the other hand, if a person has low credit score, he/she will be at higher risk, hence will be charged with higher interest rate.
Who Keeps the Record of Credit Score?
To maintain the record of credit score in India, Credit Information Bureau of India Ltd (CIBIL) in association with Transunion keeps an eye on the credit scores of individuals.
How You Can Access Your Credit Score?
You can easily access the reports of your credit score with the help of CIBIL. Actually, your credit score is given in a report, commonly known as CIR ( Credit Information Report). Whenever you look for credit, it would be advisable for you to look for your credit score first. A good credit score and your repayment ability can actually help you avail the credit at lower interest rates.
How You Can Keep a Good Credit History?
By following the below steps, you can easily maintain a good credit score which will help you to bargain for the low interest rates.
- Always pay your EMIs or credit cards bills right on time.
- Try to use almost less than 30% of the total credit available for unsecured loans like-credit cards and personal loans.
- Holding multiple credit cards with outstanding balances are considered as risky by banks. So, avoid using multiple credit cards.
- If you have one old credit card, think twice before closing it as it signifies the longevity of your relationship that you have maintained with the bank.
- Try to avoid over-using your credit card as it can directly impact your credit history. It can create a negative impact on your credit score.
- If you are having joint accounts, try to monitor your account regularly to keep an eye on default payments.
- Apply for a credit card only when you have a genuine need for it as unnecessary inquiry can impact your credit score negatively.
- Keep a track of your own credit history so that you can always be aware with your updated score.