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Kolkata: For the credit-hungry modern consumer, the credit score is a veritable lifeline. It decides all issues related to a loan application that you can make -- what interest rates would you have to pay, what are the repayment terms and, mother of all questions, whether you will be sanctioned any loan at all. But then there could be situations where one does not have a good credit score or hasn't taken any loans (or credit cards) at all. What does one do in such circumstances?
Personal finance advisers say that if one has a low credit score and if he/she is desirous of improving it, one can raise a small loan to begin with and offer a robust repayment track record that credit information firms can incorporate in their records. Many banks offer a minimum personal loan of Rs 50,000.
The most significant point is that one does not need a substantial salary to get a personal loan. For example, the country's biggest private sector lender, HDFC Bank says that it is open to consider loan applications from anyone with a net income of Rs 25,000 a month, this bank says.
The trick is to repay this loans on time without a single delay in meeting the EMI obligations. If you can pull it off, your credit score will improve and with a higher credit score, you would be eligible to apply for a higher loan which will be subject to your income, your standing expenditure and other factors that can impact your repayment capacity.
Personal finance experts say that after a credit score rises, one could apply for a bigger amount after six months to a year. Students typically do not have any credit history are often advised. They are usually advised to get a credit card offering an asset as collateral. These credit cards are called secured credit cards. Once credit card dues are paid according to schedule and one does not exceed 30% of the credit limit, a good credit score builds up over time.
What is a good credit score?
Credit scores are usually given on a scale of 900. The following table gives an idea of what is mean by a excellent, good, average and poor credit score.
750-900: Excellent
701-749: Good
621-700: Fair (May be considered eligible for a personal loan but unlikely to get good terms)
551-620: Low (Approval of sanction is difficult)
