My personal take on credit score repairing.
About 11 months back, I plan to buy a new home. To finance this new home, I decided to avail a home loan as my savings are not enough to meet the cost of a new house. While exploring home loan options, I came to know that personal credit score from credit bureaus such as CIBIL or Experian or Equifax, is a crucial deciding factor in loan eligibility. Means, a good credit score could result in a lower interest rate and larger home loan amount. Whereas, a bad credit score could be a strong enough factor for the rejection of home loan application.
My CIBIL Score Was -1.
I got checked my credit score with CIBIL and the result was -1. Some banks were not even providing a loan at the score of -1. But, How came -1? I had not defaulted any loan and also, was earning a good salary. I hadn’t has any criminal record, though. But, credit bureaus were assigning a -1 score to persons with no loan history. That’s it.
You need a credit score greater 800 to grab best loan offers.
And, I needed an 800+ credit score to grab the best home loan offer with the lowest rate of interest in the industry and loan amount big enough to fulfil my requirement. After much research, I got to know that a credit score in the range of 900-300 is only awarded to the persons with the credit history of more than 6 months. And, a credit card repayment history is also considered for the same. So the obvious answer was to have a credit card.
But, I believed credit cards as bad as a devil. Having a credit card and purchasing things with it, would make my expenses go uncontrolled. I decided to give it a try.
I applied for a credit card.
I applied for my first credit card. My credit card application got accepted, straightforwardly. And soon, I had my credit card in my hand with a 3 lac credit limit. I spend approximately ten thousand each month for the first six months and repaid the full credit card dues on time. It was then, the time to check the credit score. But, to my surprise, my CIBIL score was only 716 at that time. I needed an 800+ score and I had repaid the credit card dues on or before time yet I had a credit score under 725.
Nothing was making a sense to me about credit scores. When I didn’t have a repayment history my score was -1. But, when I build a good track record of repayment, my score was only improved to a mere 716 points.
I found the solution.
But, there was a comment on my credit score stating about high outstanding amount than average credit availed. This was the key.
Next month, I used my credit card for wherever possible and make dues more than 50K and paid my dues on time. For the two months after this, I almost did not use my credit card. I rechecked my score. I finally got a score of 808.
So, how one should build a credit score. Get a credit card, use it equal to your salary for first a few months, repay on time. And then stop using it at all. You will get a good credit score soon.
Share your experience with credit score and credit cards in comments.