5 Ways to maintain credit score in new normal

Credit score impacts financial transactions including loans and Credit Card limit, which makes it important to maintain good credit score.  A bad credit score can be a result of late or missed payments. Though RBI has advised credit bureaus to overlook missed payments for six months starting March 2020, it is essential to continue making regular payments to avoid a higher interest burden at a later stage.

Foremost is to prioritise payments based on their relative importance to your long-term financial wellbeing. So, if you haven’t already, review your credit report and draw up a financial strategy that will protect your credit score in this time of uncertainty. Wondering how? Here are some practical ways to keep your finances in order and manage your credit score in the post lockdown world.

1. Pay instalments on time

This is, by far the easiest, yet most important way to manage your credit score. Paying your EMIs on  debt like a home loan, car loan, or personal loan can go a long way in maintaining your creditworthiness. Keep track of your due dates and ensure that your bank account is sufficiently funded to avoid late charges and interest. Note that if you miss a payment by a couple of days, your lender may not report it to the credit bureau immediately. However, a payment that is 30-days late or more does impact your credit score negatively.

If you are an HDFC Bank customer, you can schedule auto-debits from your savings or salary account seamlessly via NetBanking in just a few minutes.

2. Opt for deferred payments

As a breather to consumers, the RBI has further extended its moratorium on loan repayments until August 2020. This has effectively suspended EMIs for consumers who wish to opt for it while mitigating any negative credit impact. So, if this is an option you would want, contact your financial provider to defer payments if you are having difficulty making ends meet.

However, it is essential to note that the interest accumulated can extend your loan tenure by six months to a year or increase your EMI amount proportionately, should you choose to defer payments.

3. Don’t neglect to pay credit cards bills

Credit card bills are often given the least priority when faced with a financial crisis. However, paying at least the minimum due on unsecured debt is critical for maintaining a healthy credit score. Therefore, contact your credit card company and check if they can restructure your payments so that the amount goes towards the principal balance amount minus any fees and interest.

4. Check your credit score

You are entitled to a Free Credit Score once a year. However, if you have taken on more debt recently, you must get a fresh one to see if your credit score has changed and if so, by how much. If you find any discrepancies or errors, bring it to the notice of the credit bureau immediately so that it can be rectified as soon as possible.

5. Understand credit score risk factors

Your credit report will include a list of risk factors that lenders consider when evaluating your creditworthiness. It describes the five most prominent factors that you need to focus on to improve your credit score in the long run.

The factors are:

.                    1.Payment history
                     2.The amount owed
                     3.Length of credit history
                     4.New credit
                     5.Types of credit in use.   

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So, make a note of these factors and work on improving your credit score over a period of time. For example, if you have ‘high credit usage’ as per the report, be mindful of the number of loan applications you make each year.

​​​​​​​With HDFC Bank, building and maintaining a high credit score is easy. You can get instant and easy EMIs repayment options, which offer flexibility to improve your credit in the long run.