How to make my credit score, soar?

Many people in India don't know what a credit score is or even if they do they don't give much thought about it.
For people who don't know what a credit score is – A credit score is the aggregate of all the financial loans a person has availed and how well or consistently they pay back the loan availed. It has the complete history of all your borrowings and paybacks.
Even if your loan application or credit card application was rejected will affect the credit score, with this background let us see why credit score and credit history are important.

So why is Credit Score and Credit History important?

Let us take an example, 2 people, Rahul and Kishore have the same profile as below

Name: Rahul/Kishore    
Age: 26
Salary: Rs.7,50,000 per annum    
Company: XXX (Highly reputed)
Existing loans: Nil    
Residence: Own home

Both apply for a car loan of Rs.5,00,000. Now you would expect both to get the same offer from their banks. Well, that is where you are wrong. Banks when they check the credit report of both, on analyzing the credit reports the bank will see Rahul's credit report and see that he defaulted on paying his credit card dues twice.
Now Rahul is considered a risk in the eyes of the bank while Kishore with repayment is considered 'bankable'. Kishore is the one who will get a better offer from the bank while Rahul will get an offer with a slightly higher interest rate.

Now let's come to the question will your credit score increase when there are changes in your credit report?

From these two examples, you can see that 2 people with the similar get such varying offers when they apply for a loan just because of their credit history. We can confidently say that any change in your credit report will influence your credit score.

Positive effects will give you a positive score while defaulting will have a negative effect on your credit score.

Now you will ask what are the factors that affect your credit score?

There are 4 major factors that affect your credit score

1.    Payment history – Whether you have paid your credit card dues on time or your loan EMIs on time. If you default even one month it will get reflected. If you have a report saying written off or settled will have a huge impact on your score

2.    Multiple enquiries – If you made multiple enquiries for loan or credit cards within a very short duration then you are considered a credit hungry person. This does not sit well with a bank

3.    High credit utilization – Having a high credit utilization means your debt is increasing. This may have a negative effect on your score

4.    Credit Mix – Having a balanced mix of secured as well as unsecured loans/ dues improve your credit score.

How to maintain a good credit score?

1.    Review your credit report – Frequently review your credit report to check for any discrepancies. If there are any rectify them at the earliest. Some of the common errors include non-closure of loans after full payment, a mistake in personal details etc.

2.    Don't miss any payment – Even if you miss on paying a single payment it will affect your report. Automate your payment process to avoid this.

3.    Credit limiting – Keep your credit utility to a maximum of 70% i.e. leave 30% each month. This will show that you don't have too much debt burden

4.    Avoid multiple loan or credit card application – As mentioned above applying for the credit card or loans from many banks at the same time is highly erroneous. Any rejections of loan or credit card application will have negative effect on your credit report

As you can see any changes to your credit report will affect your credit report. It can be negative as well as positive. It depends on how diligent you are that will decide if any changes will help soar your score or sink it.

To know what your credit score is and if you have any discrepancies that need the fixed login to Credit Mantri to get it solved.