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How can I improve my credit score?

It is important to have a good credit score to avail the loans easily from banks. These days banks rely on credit score as one of the criteria to ascertain the interest rate that they will be charging from you, especially in case of home loans.

ET CONTRIBUTORS|
Nov 25, 2019, 11.21 AM IST
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It is important to have good credit score to easily avail the loans from the banks.
  1. I am 48. I earn Rs 50,000 a month and have no savings. I suffered losses in a business, which left me with huge loans and unpaid credit card bills. This impacted my credit score. I have repaid my loans, but my credit score remains low. I have approached banks to improve my score, but it is a lengthy process. Who can help me?
    Raj Khosla, Founder and Managing Director, Mymoneymantra.com says, "Organisations like CreditMantri or CreditSudhaar can help you understand your credit profile and credit information report, and assist you in improving your score. However, you may also do-it-yourself (DIY). There is no short cut or a quick-fix. Develop a step-by-step approach towards remedying your creditworthiness. First, apply for a credit card against a fixed deposit. Actively transact your regular monthly expenses through this card. Ensure that you do not utilise more than 30% of the card limit and diligently repay before due date. Never roll over the balance to the next billing cycle. This will gradually build good credit history and exhibit improved score within six months. Alternatively you can apply for a small cash loan up to Rs 1 lakh and repay it within six months and improve your score. Lastly, I must exhort you to absolutely not lose faith and to proceed positively and confidently towards financial well-being."
  2. I have three credit cards with a total outstanding of around Rs 2.25 lakh. I have been out of work for the past two months and not been able to pay the bills. I can borrow Rs 1.5 lakh from family and friends, but it won't be enough to clear all dues and close the cards. What should I do?
    Raj Khosla Founder and Managing Director, Mymoneymantra.com replies: In my opinion, settlement is not the right option, at least for now. It appears the unemployment is temporary. You can, therefore, pay any amount in excess of 5% of the total outstanding or the minimum dues for the time being. Once you get a job, you can pay the remaining amount. You should certainly not try to reach a settlement for outstanding card dues since it would reflect badly on your credit score. If there is zero chance of finding a job, you may consider the settlement route and directly contact the collections department of the bank. Meanwhile, spread the Rs 1.5 lakh in the same proportion as the outstandings.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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