How To Maintain A Good Credit Score

Despair not if a low credit score has impaired your ability to access loans. Specialised lenders can get you back on track.

- Naveen Kumar

Has your loan application been rejected due to a poor credit history? Credit has become an essential part of the personal finance of most individuals. Though credit for consumption is never a good idea, loans for creating assets such as a home or for furthering your education are worth considering. A line of credit also comes in useful during emergencies.

However, a poor credit history may significantly diminish a person’s chances of getting a loan. Payment defaults usually occur due to challenging circumstances and lack of funds. However, with a poor credit record, it becomes difficult to secure a loan to rectify credit history even for a non-intentional default. This is now changing, with the option of accessing credit even with a poor credit score and even using it to rebuild a good credit history.

WHAT IS A BAD CREDIT SCORE?

As soon as you apply for a loan or a new line of credit, your lender checks your credit history with the credit bureau. Lenders provide repayment data of all borrowers on a regular basis to these credit bureaus, allowing them to record each repayment by a borrower who has availed of a loan from an institutional lender in India. If there is any delay, skipping or default in repayment, then it is reported to the bureaus. Based on the repayment track record, amount and type of loan and several other criteria, a credit bureau assigns a credit score to the borrower. CIBIL TransUnion is the most widely used credit score. A number between 300 and 900 is ascribed, with a lower value denoting poor credit history and vice-versa. Usually, a score above 700 is considered good for secured lending, while 750-plus can even get you an unsecured loan. Lenders consider a borrower with a credit score below 600 too risky as there is a higher pro bability of default. A majority of lenders are likely to reject any loan request by such people.

CAUGHT IN A DEBT TRAP