Credit score

Borrowers who repay their debts on time and in full over time,develop the reputation of being lower-risk borrowers. Lenders will be willing to offer such borrowers various concessions,something that they will be reluctant to offer riskier borrowers —who have a bad credit history. Loans offered to low-risk borrowers are numerous:

A better bargain with the lender: If you have a clean credit record,then you can bargain with the lender for slightly cheaper rates for home,car,personal or any other loan. You may also find that the lender is willing to give you better terms such as a slightly higher loan amount,or better repayment tenure.

Loans will be processed faster: If the credit bureau’s databases show that you have a good credit history,the lender will have no reason to delay processing and thereafter,sanction your loan at the earliest. This gives one peace of mind and saves a lot of time and effort,especially when your need to get a loan is time sensitive (for instance,where you need a home loan approved to apply for a property transaction before a certain deadline).

One can find his/her credit information report from credit reporting agencies like Credit Information Bureau India and Equifax India. Each of these credit agencies captures one’s credit history by means of a score. If you wish to see your score,you can apply to one such agency and get your credit history by paying a fee,which may be as low as Rs 150. These agencies usually take 2-3 weeks to dispatch the credit history.

Everyone can work towards building a clean credit record with a little bit of effort. So,whether you have a lot of outstanding debt or have never had debt before,building and maintaining a credit history is totally within your control. A few key issues to keep in mind are:

Pay your bills on time: Maintain a good repayment record on all your due payments,as this is the first step to a clean credit history. These payments can be monthly installments towards your house loan or car loan,a personal loan or a credit card. Sometimes,credit bureaus may even track how timely you are in paying your utility bills like for water and electricity,since these serve as a proxy indicator for how one behaves when he owes money to someone.

Check your credit score: If you are about to apply for a loan in the market,it might be worth your effort to get your credit score from one of the bureaus. If you see that something has been captured in error or is wrong,you can ask for it to be corrected or at least seek a clarification before you make your loan application.

Keep the number of loans to a minimum: Credit is easily accessible in India now. However,the fact that it is easily available does not mean that one should take multiple loans. Credit bureaus also track the number of outstanding loans one has and if it is seen that one takes a loan for every other requirement,it will suggest that one is living beyond one’s means. Clear off existing debts before you take fresh loans. Also,taking too many loans may lead one to a vicious cycle of having to take fresh loans just to pay off old debts.

i Trust Financial Advisers