As Indians, we have a well-known affinity for numbers. We know our numbers; not only in the field of mathematics but also in other parts of or lives, including, obviously, in cricket. You can count on, pun not intended, Indian fans to remember and talk about multiple records on the field and discuss the statistics of their favourite matches. We remember the number of hundreds and fifties that stalwarts like Virat Kohli and MS Dhoni have scored and many of us have even taken note of how many boundaries Sharma ji’s son (no, not the one in the Indian cricket team) has hit in the last neighbourhood cricket match between local school kids.
In every 20-20 game of cricket, fans will collect around computer and TV screens and discuss scoring rates, required run rates and predict team scores. Of course, all of us know that the higher the score, the greater the chance that our favourite team will win.
Surprisingly, we don’t see same passion in Indians towards their own credit score. Here, we see a lukewarm attitude, or the dreaded “chalta hai” approach. This leads to poor discipline and bad credit habits. Borrowers are sometime fine with delaying payments by a few days or keeping small amounts overdue. In such cases, where is the aggressive attitude that rears its head up if our team loses by a few runs. Don’t we regret that one boundary that was given away carelessly or that run out that could have been avoided.
We are in the middle of a digital credit boom, especially as businesses shift from the unorganised to the organised sector. Banking is becoming more digital and hence we can’t lose sight of our credit score and should be regularly checking that it is ticking up.
Today, despite whatever other information on credit history is available, the first box lenders like to tick is the presence of a good credit score of the applicant. In the era of online and digital lending, credit score is a significant tool for initial acceptance/rejection of your application. A healthy credit score will have a positive bearing on your borrowing eligibility and get you more bankers to bid for your file. This will also lead to better pricing of your loan. So, to leverage your assets and your capability, it’s important to keep your scorecard good and history clean. It is also important to understand that for small businesses, the promoters’ credit scores are a critical part of the decision to extend a business loan.
To keep your credit score in good health, a few points should be noted. First you should understand how much of your cash inflow you have available to earmark for loan repayment, i.e. your EMIs. This is estimated after deducting your expense commitments towards family or business or any other obligations including contingencies. Second, you have to estimate how much borrowing these earmarked funds can serve. Hence, you must negotiate hard on the pricing and tenor of your loan. This can ensure that you can either have a higher loan eligibility for a given EMI or that you will pay a lower EMI for the amount of loan you need. You should remember to keep some cushion for upward movement in interest rates. Third and most important, you should keep a watch on your EMI payments and ensure that they gets deposited with the lender in time. Any delays will reflect in your CIBIL or other credit bureau scores and will likely result in your score falling. You must maintain discipline in repayment by keeping sufficient balance in your bank account and not indulging in over borrowing.
Based on our experience in the banking sector, we feel that there is limited awareness about the significance of keeping a healthy credit score and the primary responsibility falls on lenders to educate their customers.
Now, a better credit score doesn’t guarantee a cricket world cup but it does guarantee a better credit solution for your finance needs. So, make it your priority and ensure your personal credit score keeps ticking up.
You can read more about how to improve your financial position before applying for a loan in our article on Credit Diagnostics.