I had a credit card, dues of which were settled a couple of years earlier. But I got a call from the card company saying my credit rating is low as I had settled the amount and not paid on time. The bank suggested I take another card, for which I will have to deposit money and get interest. This will help improve my score. Is this true?
The credit score is impacted by a combination of both negative and positive events. In the hierarchy of negative influence, settlement is not considered as bad as delinquency; however, it shall always be viewed as inferior to on-time payment. So, the settlement with a part amount written off by the bank is most likely to impact the score adversely.
Many banks are allowing customers to rebuild their credit record with a secured credit product and the credit card with a deposit securing it is a prime example of such an offering. This is definitely a good means of rebuilding your track record. However, as with any other credit product, it should be taken based on the credit need and also be monitored to ensure that it does not again impact adversely. Note that such a secured credit product need not be necessarily taken from the same bank, as the score will generally be bank-agnostic.
I took a personal loan at 18 per cent. My friend, who took a loan from the same bank, got it at about 17 per cent. The bank said his credit score was better than mine. How can I also get a lower rate? Does this also happen with other loans?
All repayments are recorded on your credit report. If you pay your easy monthly instalments on time, while staying within the agreed credit limits and making necessary credit card monthly repayments in full and on time, your report would reflect this. If lenders see a well-managed credit history, it would positively impact your credit score. The extent of benefits extended to a borrower varies from lender to lender, as they use credit scores differently while evaluating their customers' credit-worthiness. The dominant benefit we have seen coming through in the sector is in terms of better processes and faster turnaround times for the higher credit-scored customers. However, it is likely some banks would have moved to using credit scores to differentiate rates. You will be able to get a better rate in this case once you have been able to establish a good credit score as well.
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