A credit score of 750 and above assures you of great deals on your loans; you are sure to get a lower interest rate and various value-added benefits.
The ongoing Covid-19 pandemic has affected the livelihood of millions of Indians. Many have lost jobs or have had to do with cutbacks in their salaries. This has resulted in the increase of NPAs (Non-Performing Assets) across all leading banks.
Missing payments or late payments have also had a great effect on the credit score of borrowers. The interesting part is, borrowers are not even aware that their credit score has been affected and are carrying on unawares.
A lower credit score translates to favorable loan terms for the borrowers. The interest rate is pretty high and the borrower is not even in a position to negotiate with the lender for better terms. Many borrowers learn about their credit score debacle only when the lender informs them that their loan is rejected due to a low credit score by which time it is too late to make immediate changes.
What is a credit score? How does it impact my chances of getting a loan?
Your credit score is a 3-digit number that indicates your creditworthiness. It’s based on your credit history, which is gleaned from the ‘Accounts’ and ‘Requests’ portions of your credit report. It normally ranges from 300 to 900. Your loan application is more likely to get accepted if your credit score is closer to 900.
The four accredited credit bureaus in India are CIBIL™, Equifax, CRIF High Mark, and Experian. Every year, a person is entitled to one free credit report. Any of the four credit agencies can provide you with a credit report and credit score upon request.
Alternatively, you can get your Free Credit Health Check from CreditMantri! It’s quick and instant and 100% safe. Once you have got your latest credit score, move on to the next section to see how you can improve it.
How to improve my credit score after a dip?
These have been tough times. But not to worry if your credit score has dipped in this past year. You can always get it back on track. Follow these simple steps to improve your credit score;
1. Communicate With Your Lenders
Talk to your lenders and creditors and see if any assistance is available. You will be surprised to learn that most lenders are ready to provide you with timely help to get your credit score and report back on track. So, talk to them. Tell them your situation and see how best you can work out a plan regarding your loan or credit card outstanding.
2. Obtain Your Most Recent Credit Report
To begin, you’ll need your most recent credit report to figure out where you stand. You may acquire yours, as well as a thorough credit health study, from the CreditMantri website. Look for areas where you can improve. Once you’ve determined what you need to improve on, get started right away. It could be a payment default, a late payment, or overuse of credit. You won’t be able to correct it unless you realize where you’re going wrong.
3. Reduce your Credit Utilization Ratio
If you used your credit card a lot during the pandemic period, your credit utilization ratio might have been affected. Your credit usage ratio is a major determinant of your credit score. Reduce your credit consumption and aim to lower your credit utilization ratio now that you’ve taken a break. This is an excellent approach to raise your credit score.
4. You Should Pay As Much As You Can
Strive to make at least the minimum payment on accounts, or whatever amount you and the lender or creditor agree on, to avoid late payments showing up on your credit reports. It may be difficult in the current environment, particularly for someone facing job loss, but paying the minimum amount required can go a long way toward maintaining a decent credit score.
5. Ensure That Your Credit Report Is Accurate And Up To Date
You are entitled to a free copy of your credit report from each of the four major credit agencies once every 12 months. Use this opportunity to get a copy of your most recent credit report and examine your credit situation. If you identify any problems, file a dispute right once to have them fixed. Make sure your report is up to date and that all of your payments are properly documented.
6. Include A Customer Statement On Your Credit Reports If Possible
Credit bureaus allow you to include a 100-word summary of your situation on your credit reports. Learn how to make a credit report declaration to alert potential lenders that your current situation is exclusively due to the epidemic and that you are doing all necessary steps to remedy it as soon as feasible.
Conclusion
The current pandemic scenario has come as a complete shock to the entire world. Something of this size had caught us off guard. Sadly, the pandemic has wiped out millions of people’s livelihoods and sent millions more into financial ruin. For many people, the choice is between taking care of their families and paying their credit card obligations.
Credit score is now receiving relatively little attention. However, it’s important to remember that maintaining credit health just requires a few easy steps. Following the steps outlined above to improve your credit score during these challenging times is helpful in the long run.