Repayment of a loan has two parts- the principle and the interest on the borrowed amount. And thus every person who is applying for a loan tries to find the lowest interest rates possible. A low interest rate makes it easier for the borrower to repay it back as there is less interest added to your monthly payment.
Bank interest rates are not set generally but they are set up on the basis of your credit score. Banks check your CIBIL score to measure your credit worthiness i.e. the ability to repay back the loan which is one of the main factors in deciding interest rates.
The major credit bureau- CIBIL, collect data from lenders and banks about your credit history and payments and compile this data into your credit report. Banks use these reports to determine your credit worth. The better your credit score, the better interest rates you get and the lower your credit score, the higher will be your interest rate. Higher credit scores show the lender that you've handled credits well in the past and pay your dues on time and thus lower interest rates while in lower credit score, the banks see you as a high risk customer and are disbelieving about you paying off your dues.
The higher risk you pose as a borrower, the higher interest rates the banks set up for you and vice versa. The range of a credit score generally is 300 to 900. A credit score higher than 750 is most likely to get lower interest rates and anything below 600 gets you higher interest rates.
Want to learn how to step forward carefully,so that it doesn't affect your credit score and thereby your lower interest rate? visit us @ www.cibilconsultants.com
source - secondary
Your cellphone/ telephone bills are one of your necessary monthly payments. Most people don’t know this but skipping a bill payment or not paying your mobile bill doesn’t only cut off your network, there is another reverberation to it too. Like your other monthly expenses like mortgages and loans, not paying your mobile bill affects your credit score too.
So how exactly do your mobile bill payments affect your CIBIL score?
Like it usually happens with other bills, not paying off your mobile bill may damage your credit score. Most mobile networks would cut off your network if you don't make your payments. You may think that you only have an outstanding bill and there's nothing for you to worry about. But you wouldn’t even know and by the end of this you’ll be stuck with an undischarged bill as well a low credit score.
After cutting off your network they’ll most likely report your non payment dues to the credit bureaus and then turn your debts to the debt collections agencies. An account which makes itself to collections stays on your credit report for a good 7 years thereby harming your more. So pay off your cellphone bills on time to save your credit report from any harm.
You may be thinking not paying a bill can negatively affect my credit score so does paying it improve the score? No it doesn't. Since your bill payments are paid by cash or from your bank account and also your mobile network company hasn't given you credit, your payments are not reported to the credit bureaus.
If you do want your regular bill payments to affect your credit score positively, then use a credit card to pay off your bills instead of paying it in hard cash and if you can’t get a credit card, you could opt for a secured credit card. Whatever you charge on your credit card is limited to the amount you put on your card. And your credit card issuer will report your payments to the credit bureaus, and thus, you can build your credit score with your mobile bill payments.
Get more solutions and expert advice @ www.cibilconsultants.com
source: secondary
You may pay off your loan early to save money and free up some of your debts. But if you are hurrying up, in hopes of increasing your credit score, then, you may be on the wrong path. Just paying off the loan early won’t increase your credit score. Though, it is known that paying off debts increase your credit score, you need to know that you should use credit accounts in order to maintain good credit.
Paying off an installment loan according to the term of loan can benefit your credit extent.
Shortened Credit History:
Credit History is one of the factors in calculating the credit score. The longer credit histories you have, the better it is. That is why open accounts work in favour for your credit history. When you pay off the loan early, it shortens the average length of your credit history and may work against your credit score. A history of on-time payments works greatly in favour of a good credit score.
Closed Account:
Paying off a loan early means, your account will be closed off earlier than before. Closed accounts don’t mean much to your credit score. Credit scoring models weight open, active accounts more than closed ones. If you are paying monthly payments on your loan diligently, you are maintaining a good credit score.
Mix of Credit:
Having a mix of credit is one of the factors for a good credit score. You need to show a positive credit history and timely payments for both, installment loans as well as revolving credit accounts(Credit cards & other credit lines) Paying it off early will shorten your credit history and it won’t show up to indicate that you have a good mix of credit for your credit score.
Making timely payments each month than closing your account indicates to the lender that you know how to manage credit responsibly. That is why making timely payments and paying off the loan in its terms has more benefits than paying it off early.
Learn how and when to pay off your debts for a good credit score.
Visit www.cibilconsultants.com
Source: Secondary
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