FINANCE TIP OF THE DAY
Can you afford your loan?!
Know the quantity of loan you can afford. The banks may sanction loan based on your income but you should look at your monthly expenditure and see if you can afford the maximum that banks offer. As a thumb rule, remember not to let your credit exceed 40% of your income!
Score with your credit card!
Currently there is an increasing awareness about the importance of a credit score and the
impact it has on any loan who wish to opt for in future! If you are one of those individuals who plan to take a home loan a few years down the line and do not have a credit score at all, then it is time to thought of starting a credit score record, which will benefit you in the long run.
What does a score look like and what is a good score?
A credit score is generally a three digit number within the range of 300 and 900. Higher the score the better it is. This score will reflect information from several lenders and across various loans.
What information does a credit report contain?
Apart from containing all personal identification information the credit report records your repayment history if any in the case of a loan or a credit card.
Your credit card can be the single most important factor in improving and increasing your credit score. On the other hand it can also plummet your score to dark depths if you
are not careful. Think smart and use your credit cards to your advantage.
Here are some pointers on what to do and what not to do in order to achieve this reality.
No debts so far. Opting for a brand new credit card for the first time.
This makes sense for your credit score. Making use of a credit card judiciously will help
you improve your credit score. Just make sure you open your credit card with a respected and popular brand name.
Low credit limit.
Keep a tab on the credit limit of your credit card. Open a credit card account with a
company that will provide you with the highest credit limit possible. High credit limits,
even if they are not used will add merit to your credit score and improve it.
Choosing the ideal credit card to close.
The number of years you hold a credit card account has an impact on your credit scores.
Hence, let your oldest credit card be, if you must close a card opt for the most recent
cards and close them one at a time, maybe once a month over a period of time.
Bargain for a lower interest rate
If you have never defaulted on a payment for a few years, make use of your good
repayment track record and speak to the bank officials for a better bargain. Request them to lower your interest rate citing the good track record you hold with them. Keep following up with your bank from time to time and you may just get your wish!
Request for an increase in credit limit
You may have purchased your most recent card because of the higher credit limit. If at
a later date you wish to close some of your cards and you know it makes better sense to
close the most recent card, you have a dilemma. The most recent card has the highest
credit limit. The oldest card has the lowest credit limit. What do you do? In such instances, if you have a good repayment track record, approach the bank and negotiate for a higher credit limit especially since you have been their customer for quite a few years. Most banks will oblige and you can then proceed to close the most recent card if you absolutely must do so.
Keep a self imposed credit limit, which is much lower than the actual credit limit.
Never exceeding 40% of your credit limit has a very beneficial effect on your credit
score. This shows your credit limit is high but you have not burnt it up and have plenty in
reserve. This logic helps you attain a much higher credit score. This is the same logic that
suggests you should not close any credit card accounts, as they collectively will provide
you a high credit limit, which is good for the score.
Paying off credit card dues quickly will dramatically improve your credit score.
Try not to encourage too much credit card debt. Be wise and pay the dues quickly and
keep rotating your cards. Paying off dues will cause a spike in your credit score, which is