One needs to be on guard against identity theft as it will affect the creditworthiness even without the card owner realising it.
Many of the individuals wonder how to improve their credit score. It is obliviously difficult to boil this down to few factors that help an individual to attain a good score. But, by having a yearly credit review and prompt repayment of loans and installments will definitely improve credit rating.
“There are more than 130 factors that influence credit score of an individual. The credit scores are based on various factors like out right non-payment of loans, installments that are overdue, identify theft and incorrect financial information,” says Satya Lalith Kumar V, co-founder, ICrediZen .
About the process he says, “The credit data is taken from all the banks on monthly basis and maintained at centralised server in Mumbai. The credit information report or TransUnion score is calculated by an algorithm or programme based on the information provided by the banks, considering range of factors.
“The TransUnion score ranges from 300 to 900 for an individual. The higher the score is, the better is creditworthiness of the individual.
“For instance, if an individual has a score above 700, it shows that he has good credit history and this score acts as an acknowledgement for his good payment habits and reliability. Many of the banks boastfully say 80 per cent our credit portfolio has a score more than 800, which in turns means the risk the bank carrying is very low,”
However, one cannot be
guaranteed that prompt payment will simply give good credit score.
“There is also possibility of errors and identity theft, with out the notice of the individual, which may spoil his creditworthiness. For instance, our client’s educational loan application for her daughter was rejected based on the credit report. After evaluating her credit report, we found that there is overdue of `6.5 lakh on her credit cards. When asked, her daughter said that
her mom doesn’t know how to use ATM card, how can she apply for a credit and on top default on it? Although, she is a good payer; she underwent all this issues because of identity theft,” Satya explains.
“It is mandatory and must for every individual to seek credit report from CIBIL every year and has to rectify if there are identity thefts and errors to safeguard his financial future.
“Even in the US, only 38 per cent of the individuals only come to know about the identity theft in first three months of its occurrence. The others even don’t know that there is an identity theft on his/her name till a very later stage. This will seriously affect credit rating and cause severe damage to the financial credibility of an individual,” he adds.
Dos and Don’ts
- Try to keep outstanding balances low on credit cards
- Don’t change your address often
- Sticking to a single job for long time
- Don’t use too much credit
- Check the report at least once annually