With the rise in the level of stringency by the RBI, it is practically impossible for individuals who have defaulted on their previous loans or credit card dues to be lent with more credit. Banks and other non banking financial institutions do not fail to look into the Credit Reports of their prospective borrowers as one of their main criteria to process their loan application. In such a scenario, you can be the better judge in deciding as to how important it is to maintain a good credit report.
What is a CIR?
Credit information Report is basically a compilation of the entire credit history of an individual. It is a record which enlists all the different types of credit in the form of loans, credit cards and various other types of borrowings, the borrower might have availed earlier and also states the number of times the borrower has defaulted. Apart from that it also contains information pertaining to matters like the date on which an account has been opened, overdues, written off amounts, credit limit given etc.
With the help of this CIR, lending institutions will be able to analyze your credit score. Once they receive the credit score, they will choose which their scoring model based on which you will be weighed as to whether or not your application can proceed ahead. Large lenders also provide the facility of customized lending models. For example, if the borrower applies for a home loan, the bankers will be interested to use that model wherein his focus will be on the borrower’s home loan payment history.
Along with the CIR and the credit score, other factors such as the borrower’s income, age, occupation etc are also considered along with the loan application. Also the interest that will be charged also depends upon your credit score.
By practicing disciplined payment behavior and by avoiding reckless utilization of credit you can maintain a good credit score and ensure all your future credit requirements are fulfilled. Following are the ways in which you can maintain a good credit score:
Pay your bills on time:
Paying your bills on time ensures that you do not pile up your credit and avert any unnecessary financial expenditure that can arise due to late payment fines etc. Debt when cleared on one account is way better than transferring the same debt to different accounts.
Manage your credit properly:
Judiciously utilizing credit can be one of the basic steps to avoid any further financial complications in future. Remember, borrowing is not hated. But it helps in creating a good credit score in the long run. If at any point you feel the difficulty in repaying back your credit, notify the banker immediately so that your father may not withdraw unnecessarily.
Do not keep any balances:
Many people get fooled by the credit card scheme which says it is alright if you can at least pay off the minimum balance. Maintaining a revolving credit will only increase your financial burden as you will have to pay a higher rate of interest at the end of every month.
Do not opt for many unnecessary cards:
It is not a wise decision to open various credit card accounts under the assumption that they can utilize the credit as and when required. It is not right. This can create a negative impact on your credit score enabling the non availability of loan facilitates if in case you require more on any other date.
Following these steps makes way for a smooth availability of debt as and when required without any disturbance of any kind of financial threat around.