Creditvidya.com | Updated On: September 16, 2014 12:39 (IST) | NDTV Profit
Each bank has its own criteria for lending. However, Cibil score of the borrower is a big factor in determining the lending rates and amount. Most banks would prefer borrowers with a Cibil score of 750 or above, some even have a cut-off of 790. This festival season is a great opportunity to improve your credit score.
When Sumi Ghonorkar was a child, Diwali was a magical time — Family get-togethers, new clothes, gifts, sweets and lots of crackers. Now she is 35 and Diwali means cleaning up the house, giving bonuses, expenses for clothes, sweets and crackers and giving into the marketing blitz of offers and deals and buying an expensive consumer durable. For Sumi it also means a tough few months, as she has to balance budget and cut corners to overcome the festival spending. Often this spending would be on credit cards and being unable to pay the amount in full interest charges would add to the burden.
Many of us are in similar situation during festive times. Often, this binge of spending leads to defaults in payment bringing down your credit score.
Use the festive season to push up the credit score
Festival time can be a make or break as far as credit scores go. With some sensible planning you can actually give your credit score a boost. Credit card activity improves your credit history and builds up your credit score. Use your credit card to get great offers, add up reward points and increase your credit score
Rider: Ensure that you make all your payments on time. Late payments and defaults will sharply bring down your score.
Plan in advance for large purchases
Often sales and special offers come up from retailers. The best offers may not be during festive times hence it makes sense to plan in advance and buy things you are sure you will need during the period when there are sales and offers.
Rider: In the excitement of a sale, one often tends to buy things you do not really need resulting in overspending
Use an instalment loan
An instalment loan or an EMI loan is when you buy an asset and pay back a fixed amount each month with principal and interest. The fixed amount is paid back for a specified time period which will be stated in the contract between the lender and the borrower.
Paying on an instalment loan over a length of time will give you a chance to build a good payment history, which accounts for around 30 per cent of your credit score. Therefore, making consistent on time payments on your instalment loan will give your credit rating a nice lift. Also it adds an unsecured instalment loan in your credit mix further enhancing your score.
Rider: An instalment that misses a payment instantly shows up negatively in your credit score. Pay on time to get the advantage in your credit score.
Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.
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Integra’s Take: The suggestions above is not an attempt to encourage you to spend beyond your means but create a healthy credit history. Be responsible and spend intelligently.