Unlike in the past taking a loan to fulfill your dreams or meet some exigency is no longer frowned upon. There are host of financial institutions that offer loan on fairly simple terms so that anybody looking for credit can access it as long as he/she fulfills the eligibility criteria. Though the borrowing process has become more objective and less cumbersome yet the applicant has to meet certain conditions in order to be eligible for getting a loan. These eligibility conditions include submission of required documents, income eligibility and also the credit health criteria. Getting a healthy credit trail can bet slightly tricky sometimes though not always. For getting a loan one requires a credit history and credit history is made only when one has certain borrowings in place, so the question is what follows what? To help you solve this dilemma we offer you a guide to build credit:
When You are New to Credit:
Credit score ranges from 300 to 900, however those who have a credit history of less than six months are given a score of NA and those who have no credit history are given a score of NH. Thus for some who has a score of NA or NH getting credit can be a challenge, if the history is less than six months then time will take care of the problem and one can apply for the loan after a couple of months. For someone with no history problem may be solved to some extent if they are employed in the corporate sectors. Most organizations have tie-ups with financial organizations so getting a loan or a credit card from such lenders might be possible even without a credit rating due to the tie-up between the lender and the employer. Getting secured loans like auto loans will be easier in such a scenario than getting unsecured loans like personal loans as in case of a secured loan the lender has collateral to fall back on in case of default.
However if this option does not work for you or you want to start building your own score then getting a secured credit card is a wise choice. Secured credit cards are issued against a fixed deposit held by the FI, so the card issuer is insulated from the risk of default. These cards function like normal credit cards and using them wisely and paying your dues on time can help you build a healthy credit over time.
When You Already Have a Credit History:
Just having a credit trail does not ensure a healthy credit score. So if you have loans and credit cards but your score is low due to some reason you still will need to focus on building your credit health. A low score could mean that you will find it challenging to get your application for a loan accepted by the main stream lenders. So if you need a personal loan for example you will have to look for lenders who might be willing to offer a personal loan for low CIBIL score. This might seem like a viable option but remember such loans always come at exorbitant interest rates and hence you need to think carefully before you decide to exercise this option.
To build your credit you need to get you CIR and go through it. Identify the cause of problem/s; is it missed payments, is it the high utilization ratio, are you too dependent on unsecured loans, are their too many hard enquiries or is it an erroneous reporting in the CIR. Once you figure out the problem you can start by addressing it and follow the basic guidelines to get a healthy credit rating. Paying on time and keeping your credit utilization ratio low can contribute in a large way, when someone is trying to build credit. Stay away from making any loan applications; don’t guarantee a loan till you are sure of the consequences, keep old debt on your report to further aid credit building.
The above guideline can help you build a healthy credit to ensure that you do not lose out on any job opportunities as some employers include a credit health check as part of the background check for the applicant.
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