Thursday, 12 April 2018

Do Too Many Credit Scores Confuse us?


What does a young blood want? With a lot of zeal and fire to achieve, youth is the new Shaping India. With more than 40% of the population in India, is Youth. It’s a saying that youth has the power to change the whole way of how a country is running. When we talk about the youth of 18-30 years, there are the shapers of revolution. New innovations, new thinking and new discoveries is shaping tremendously these days.

            Education loan has made it easy for so many students to study more and deeper to make researches and do something of what they love. When we talk about the loans, the major factor comes is the credit score. To crack the best deal of any kind of loan it’s important to know about the score. What does your score comprise of? Which are the bureaus who give the score? What factors are important to keep the score intact? Let’s go through each factor.

What does your score comprise of?

Five factors make your score.
1. Payment History: How you make the payment of the credits you have taken determines the behavior of how responsible you are. This is the major factor of how score is calculated. It also gives the idea if you are matured enough to take the charge of your finances. One should never take this for granted.

2. Amount owed: the total amount you have owed in reference with the credit card utilization and the loans you have taken. After the payment history, this is the second major thing which comprises of you.

3. length of credit history: The overall span from when you started the credit and the on-going one, is the length of the credit history. The longer is the credit history, more is the score provided the accounts are maintained well. But id in case they are not, do not close, try resolving them and make sure it adds to your score grow up.

4. Types of credit: the mix of revolving credit and fixed type of credit is the type of credit we are talking about which comprises of score. A good mix of both is healthy for your credit.

5. New Credit: The new types of credit you apply for, is the new credit. This also contributes to your score.

So, these are the 5 factors which make your score. And the bureaus pick this to make the score. Which leads to the 2nd question.

Which are the bureaus which give the score?
There are 4 bureaus in India who gives the credit score. CIBIL TransUnion, Experian, Equifax and CRIF HighMark. Over the period from the year 2000, at different intervals, these credit bureaus came into existence. They all are linked with RBI to create your credit report with the credit score made up of the 5 factors mentioned above. Now, all these bureaus have different % weight-age of how they calculate your score. All of them have different algorithms of how they calculate the score. So, the score you get while you apply for with any of the bureau differs in the number. It is okay If there is 50 points difference in the different score you get from any other bureau. There nothing to get confused about the score you must have received and differed from another you got from any other bureau.

Now the 3rd thing one might have is
What factors are important to keep the score intact?
            The question which generally arrives is which factor of the credit score one must take care of more in order to have a good score? Let’s understand that the good mix all the 5 points taken care of will result to your good score. No factor is more important or less important. The weight-age given to different points would be different but nothing can be neglected if its given less % than other. If all the factors are taken care of, your score will always be great and you need not worry. But if any of it is not taken care, the goof-ups will start resulting in a dip.

            If taken care of, the credit score concept is very easy. All you need to do is take care of the responsibility of the repayments of the credits you take. There is nothing to be confused about or not understand anything. Be credit healthy and stay vigilant.

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