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About credit score

Unfortunately, a score of 680 is not a good credit score. You will need a co signor to get any loan and almost impossible to get a credit card. You may be able to obtain credit, but the rates will likely be much higher.

Disadvantages of low credit score

When you apply for a loan or credit card the following may happen

  • Application might be rejected: Each rejection will cause your credit score to drop further.
  • Higher interest rate: This can be an unnecessary financial burden and will also increase your chance of defaulting on payments.
  • Lower credit limit: With a score of 680, lenders will offer a very low credit limit.

All these disadvantages above will have a negative and long-term impact on your credit score. Therefore, it is advisable to improve your score to 750 before applying for a credit card/loan.

How to improve my credit score?

  • SCORE BUILDER CREDIT CARD:Get a score builder credit card which you can pay the monthly bills regularly to improve your credit score.
  • MAKE PAYMENTS ON TIME: Your payment record is the most important factor in calculating your credit score and can form up to one-third of your score. It is very important to make sure that you make all payments on time and in full. Even a single missed or delayed payment can affect your score.
  • DO NOT EXCEED 50% OF YOUR CREDIT LIMIT: For example, if your credit limit is Rs. 1 lakh, limit your monthly spending to less than Rs. 50,000. If you consistently exceed that limit, it reflects lack of spending discipline and will negatively affect your score. Keeping within this limit will help increase your score.
  • CHECK YOUR CREDIT SCORE ON A REGULAR BASIS: You might think that you have a good credit score, but there might be other factors, like administrative errors or fraud, that might be dragging down your score. For instance, you might have paid your loan in full but it might still be shown as outstanding due to a reporting mistake. Check your report and immediately notify the bureau of any mistakes or suspicious activity so that it is rectified right away. Eliminating these errors will help improve your score.
  • MAINTAIN AN OPTIMAL MIX OF LOANS: Maintain a balance between secured (home/auto/gold) loans and unsecured (personal) loans. Having a higher proportion of secured loans has a positive effect on your credit score.
  • AVOID APPLYING FOR MULTIPLE LOANS IN A SHORT TIME PERIOD: f your loan has been rejected once, be patient - don’t apply immediately to multiple other banks. Each time your loan or credit card application is rejected, it affects your score negatively, so the more times your loan is rejected, the worse your score becomes. When lenders receive an application, they access your credit report through an ‘enquiry’. Too many enquiries without corresponding loan approvals leads to a drop in your score. It is advisable to first improve your score and your credit-worthiness before applying again for a loan.

    These are a few easy steps which help you to improve you credit score. This will help you to improve your credit history. The better your credit history, the better your credit score will be.

How is my credit score calculated?

Credit score is calculated on a number of factors, especially on your payment history. Your repayment track record contributes to over 35% of weightage while computing our credit score. In addition, your credit score is also calculated based on:

  • Your total available credit balance.
  • Balance between your secured and unsecured loans.
  • Number of loans and credit cards you have.
  • Credit utilization.
  • Plus, a whole host of other factors

A credit scoring algorithm is then used by the bureaus to calculate your credit score. Your credit score not only helps lenders assess your loan eligibility, it also helps them understand if you are worthy of credit. The higher your credit score, the higher are your chances to get your loan approved. So, it’s always advisable to check your credit score before you apply for a loan

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