Loans have become an integral part of our lives, especially since the start of the pandemic. Various banks, NBFCs, and fintech players have all started providing loans to those in need, but some people still struggle to get loans due to low credit scores or no credit rating. It can be noted that a credit score is something that Indians tend to generally ignore. Whether it’s a home loan, a student loan, or any other loan: a borrower’s credit rating will likely be checked everywhere.
According to industry reports, nearly 6 in 10 millennials are turned down when they apply for credit cards, mortgages, auto loans, and other financial products. In fact, Millennials between the ages of 23 and 38 experience higher rates of denial than other generations.
Vineet Patawari, co-founder, CEO of financial market learning portal Elearnmarkets.com and stock market analysis platform StockEdge, said: “This pandemic is a testament to the importance of financial independence in our lives. The future is uncertain and certainly requires good financial planning. Having a good credit rating is necessary to easily approve a loan.
So what is a credit score?
This instrument was first introduced by Fair Isaac Corporation but has now gained popularity around the world. To put it simply, a credit score is a number obtained from a person’s credit records to represent their value for any type of credit instrument.
Patawari says, “A credit score typically ranges from 300 to 850, depending on factors such as total debt levels, number of accounts opened, repayment history, etc. Any score above 650 is considered good and the person may be eligible for a low interest rate. “
Having a good credit score goes a long way. Experts say a good credit score is a gateway to a smooth financial life. This is the reason why many people actively seek information to manage their creditworthiness. To improve creditworthiness, experts say paying off loans on time is a great way to start.
How Can You Improve Your Credit Score?
- Be on time when paying bills. Experts say that you should not delay paying the bill until the last due date, try to pay it in advance.
- Check with your credit card company regularly about a potential credit increase. A good credit score increases your credit limit.
- Avoid closing credit card accounts. Patawari says, “Stop using the account, but never close your account. This will drastically harm your credit score.
- Work with credit repair companies. They perform a range of activities such as negotiating with your creditors and providing advice.
Experts say financial independence is not a sprint race. It’s a marathon. With good planning and smart investments, anyone can be financially independent.