Dear Manish,
I want to improve my credit score which is currently around 684 as per last report .
My cibil report has no “settled” or “write-offs” entries at any place.
As on today, I hold two credit cards and one education loan. Dont have any other credit exposure other than these three.
I want to improve my score and improve it fast. Have enough cash at my disposal and don’t really need these credit card or the education loan.
Can i improve my score by
a) prepaying and closing the entire education loan? out of original 6 lakhs loan, only 36k is left now and there is still an year left to pay the entire loan.
I have already prepaid 1 lakh today and brought the balance down to only 36 k.
Want to know if i should pay even the balance 36 k rightaway and close the loan account 8 months ahead of the deadline? will it improve my credit score?
or should i keep paying the nominal EMI and keep the account live till the scheduled closure date of Dec 2013?
b) Get a secured credit card (Against fixed deposit of 1-1.5 lakhs)? will this improve my score considering i already have 2 cards?
c) using debit card for all payments and staying away from using credit cards?
I have enough cash and can do all of the above three, provided they will help me improve my credit score.
Would be very grateful if you can please share your valuable advise.
Regards,
Sameer
Dear Sameer,
As you have already taken the requisite steps that would help improving your score we do not see a need for professional help.
Regards,
Credexpert
thank you Sir for all the advise.
Dear Sameer, as you are already having 2 active unsecured CCs, no need to go for a secured one. Please use both CCs as per your needs. Regarding that salary thing, you can not provide any data on your own. At best you can file a dispute with CIBIL if any DATA is wrong or not updated. CIBIL on your behalf ‘ll pull lout the correct info from the related bank or financial institution.
Early payment of Edu loan & timely payment of CCs from here on wards ‘ll create a good score only after few months for the fact that last 36 months data is not favorable to you.
Thanks
Ashal
Dear Sir,
Thanks.
a)Yes, as advised by you , will definitely start doing it (paying a bit extra) from my next card statement as well.
b) yes, using technology now. linked all credit card and phone payments to bank account. so payments should automatically be taken care of without any intervention from my side. will just keep tab
c) since you seem quite knowledge, i am forced to asked two more small doubts which i had..
1) i plan to just use my 3 cards (2 unsecured cc, one cc) for about Rs 2-3 k per month each. Movie tickets+Petrol+some other small purchase
Will it suffice in building a good credit history? or for that will i need to spend more?
current cibil report does show that i have used the card for max of Rs 65 k in a month and had returned edu loan of 8 lakhs.
Intuitively that should suffice to know that i have used substantial credit in the past.
Still, you being an expert should share your opinion once. using 3 cards*2k per month.
will talk build a strong enough credit history?
2) I have one last query.
the ” Employment Information- Income” section of my Cibil report, contains a salary which is 20% of my current salary. Probably Cibil got that figure from a credit card i had taken 7-8 years back. Have no clue but that is what i am guessing. or may be some tax return i had filed 5-6 years back.
Does it play a role in pulling down one’s cibil score? If yes, how do i ask get my current salary updated in the cibil database?
should i mail them directly with my last 3 months salary slip/IT Return form?
Is there any other way?
Thanks and Regards,
Sameer
Dear Sameer, in one of follow up, you said the CCs are no more with you. That’s why I ask to go for a secured CC. As you are already having 2 CCs running, use them wisely & pay on time. There is one little but interesting thing regarding CC payments I do myself.
Say My Bill is 12356 Rs. for a month, Instead of paying exact amount i.e. 12356, I pay rounded off to next 100 Rs. which ‘ll be 12400 Rs. From earning point of view, the excess 40-50 Rs. paid by me, does not pinch but over a period of time, such small positive payments, make a history of good credit behavior.
Use Technology for your own good. Also do not wait for last date to pay your CC dues. Please pay 3-4 days early. so that in case of any problem, you can correct it & still pay in time.
Thanks
Ashal
Hi Ashal,
Thanks a lot for the detailed reply.
yes, i agree with what you say. 10-15 late payments on credit cards i guess (over a period of 9 years btw) and another 15 late EMIs (over a period of 5 years).
as i said, i was not aware. I mean, that is what people casually say. that banks issue credit cards for levying fine and high interest rates and these are the main source of income for the bank.
I was naive enough to presume that as long as i am paying the interest and fine, bank will be more than happy with me.
that said.
Regarding “Closing credit line”. that is what was confusing me when i asked about “Whether i should prepay and close my edu loan account”. that once i close how will i build “credit history”. that said, i hope it is taken note of by cibil’s formula. that i actually paid the Rs 8 lakhs back 1 year before loan maturity. Logically i got to get some credit for that.
b) yes. i will take a secured credit card. thanks for the advise. already done research on that. icici bank “instant platinum visa credit card” looks good. will take it rightaway
the secured credit card along with my two existing credit cards will be the 3 “Credit lines” which will remain open.
Hope to use them for a minimal Rs 5k-8k usage every month. against their cumulative credit limit of 2.5 lakhs.
i hope that will help me improve my score and build my credit history.
I have one query though. I hope there is no “minimum usage cap” on credit cards.
that if your usage is just 1k-2k per month on card then CIBIL will consider that as too low and will not consider it sufficient enough to build a good credit history.
Cos if that is the case then i will be confused on whether to use the cards more or to use them less.
Dear Sameer, in your understanding you have never defaulted but in actual, you have defaulted several times. The moment, a due is not paid on time, you are defaulting. If it’s a one time affair, bank may chose to ignore it & may not report it to CIBIL. But in case it’s a regular one, each subsequent default ‘ll be reported to CIBIL. 13K mly EMI for 3 months is not the same thing that you ‘ll pay 13K*3 in one go. From bank’s perspective it’s a default & from your own admission, you have done it so many times.
This is the main reason of your low score. Now as you have stopped all credit lines, (education loans as well as CCs), there is no way that you can improve your own score. To improve it, you should avail a secured CC, Pay it on time & gradually your score ‘ll improve, it may take time any where from 1Y to 3Y.
Thanks
Ashal
Dear Sameer,
Prepaying all these loans would not help you boost the score immediately. However, if your cash flows allow you to do the same then make the payments to reduce the burden.
Secured credit cards are one of the best ways to build and improve credit score. We suggest that you apply for the same. Also credit cards come with a high interest rate and using your debit cards for the payments would be a wise choice.
Are there any late payments on your report? 684 is a low score and we would need to analyse your report to point the exact factors that could have affected your score.
Regards,
Credexpert
@ Credexpert
Thanks for those invaluable suggestions. Will surely apply for a secured credit card now.
I am very keen to take professional advise. But wondering what is left to do.
a) have closed the only loan (Education loan) which i had taken
b) 2 credit cards- have almost stopped using them. will just use them for 4-5 k a month just to “build credit history” as experts like you advise
c) secured credit card- will apply on Feb 25th itself
d) no “Settlement”, “write-off” or incorrect entry on my cibil report
Can i really do something else other than the things i have already done.
If yes then i will be keen to take professional help.
e) have activated “e-pay billers” for all my monthly payments now (including credit card, phone bills etc). so every future payment will now be made on time, even if i forget about it
Is there anything else which can be done?
Dear Sameer, Had you ever defaulted in past on those CCs or Education loans?
Thanks
Ashal
Dear Ashal,
Well, i have been “very careless” about the educational loan EMIs and card payments.
Instead of paying 13k per month as loan EMI would pay 39 k once every quarter.
Not that i didnt have money. Just that i was casual and honestly didnt know that it mattered. I thought as long as i am paying 13*12=156k per annum, it wouldnt matter to anyone.
Card payments would also get delayed at times. But i always paid up, even with fine. Fresh out of college with some money to spare and no responsibilities as such you become careless. Must have paid fines many a times in the last 4-5 years.
Guess, that is why the low score.
That said, all acounts are running. all credit cards are in operation. No defaults. No settlement. All fines paid. No discussions, no request to waive off fines.
Entire loan paid back now, 1 year before the deadline.
If you look at it, from a bank’s perspective actually a good customer who pays fines, interest rates on pending amount. Never argues or implores to reduce them.
Wonder why they report it to cibil. 🙂
Anyways, have stopped using credit cards altogether. only debit cards now. also, paid back the entire education loan.
Score should improve now.