So, have you ever wondered on what regards do banks and private lenders grant you with credits? The answer is relatively identical to your school report card, Credit score.
Initiated in 1989 by FICO, a data analytic company based on the U.S, the credit score or FICO credit score of an individual got reckoned by his/her credit files. After you pay off your first credit, you’ll be given a score based on your payment activity. If you’re a better payer then you’d have the highest credit range. But the real issue starts right after your first successful payout. If your first and second borrowings are far apart, your credit score will be lower.
In this article, I’m going to list out some amazing tricks on how to maintain a good credit score for a long time.
So keep reading.
A good payment method gives a good credit score
Is it an easy task to pay back loans credibly every time? No, it is not easy. But it doesn’t impossible either. If you have answers to the questions given below, then you don’t have to worry about your credit score, if not, follow this article till the end.
- Who is your lender?
- Who is your loan servicer?
- What should you do when you don’t have money to pay the bills?
Often, we deal with loan servicer than the original lender. Student loans and home loans are handled by them. The role of your loan servicer is to manage loans on day-to-day basis and provide you loan statements periodically.
If you’re certain you can’t pay the month’s credit bill, don’t be lazy and contact the servicer immediately. Explain your situation properly and ask them if there is an another payment plan available for you. It’s their role to find a suitable repayment plan, so don’t hesitate to ask. They also issue certificates for your loan forgiveness program. By utilizing these perks, you effectively reduce the risk of delayed payments, thereby increasing your credit score.
Benefits of good credit score
Based on your credit score, your interest rate will be estimated. If you have an excellent credit range from 740 to 799 or even higher, you’ll gain relatively lower interest rate for your personal or business loans than others.
Your credit score is also acts as a certificate when your loan application get verified. A lower score equals lower chance to receive loans. During you job applications, the company will verify your credit score to check your accountability. Also, you’ll receive a lower vehicle insurance premium if you have a good score.
How to maintain a good Credit/CIBIL score
In India, credit score is also referred to as CIBIL (Credit Information Bureau India Limited) score. Before getting into it, check your credit score at paisabazaar. Increasing your credit doesn’t occur at breakneck speed. It is a continuous process and you’ll need to devote a good amount of time, but also doable.
First, you need to review your early credit report. You’ll receive your credit report from your servicer and take your time to read it thoroughly. Check if there are bills you didn’t pay to you eventually did and find out whether your paid off credits are still listed as open. Keep an eye on what you’re paying for. The chances of falling for fraud & identity theft is always right around the corner.
Second, pay right on time and pay it full. Don’t delay payments except in an emergency. Even if you’re in hot water, make a call to the servicer and ask for support.
Third, keep your credit utilization below 30%. That is, if your credit limit (credit card) is ₹10,000 and you’ve utilized ₹5000 then your utilization rate is 50%. So, to maintain a good credit (CIBIL) score for a long time, without new loans and debts, keep it below 30%.
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