could be to take a loan against gold from leading banks or NBFCs. Again the lender is fully protected and hence is able to give a loan despite the adverse credit history.
Prompt repayment on such loans again creates better credit history. Over time the credit institution starts giving less weightage to your old default and more weightage to your current prompt payment and hence the overall credit score starts improving.
Keeping up with the Joneses
The second category of people compare their score with their friends discover that their credit score is lower than their friends/relatives and want to understand the reasons. Do not get obsessed about your credit score as long as it is above 750. Unlike the US where a movement of 5-10 points in your credit score could cost/save you thousands of dollars in interest and fees, in India lenders just use your credit score to eliminate people whom they will not consider for lending. So if you have a credit score of 825 and your friend has 775, you will still get the same rate and experience from the lender since both of you will make the grade to be considered for the loan. Here are a few things that you could do to make sure that your score becomes higher while waiting for the benefits to accrue:
Get a copy of your own credit report at least once a year and make sure you follow up to get any errors corrected to ensure it does not hurt your credit score.
Pay your bills on time
Keep unsecured loans to a minimum. Don’t close your old credit cards as repayment history on older credits has a higher weightage than on a newer facility. If you have used the credit limit on your card almost fully then apply to get your credit limits enhanced to show lower utilisation of your credit limits.
You will hopefully realise that there is a vital function the credit bureau performs and not just that of a ‘Boogeyman’. l
— Author is CEO, ApnaPaisa.com