6 Misconceptions About Credit Repair
Thirty-year-old Anita Sharma was unnerved when she saw her credit score. With abysmally low credit standing, she had lost all her hope of getting a home loan sanctioned, until she discovered credit repair.
Credit repair is a crucial step towards improving your credit image in the eyes of the lender. You can either seek professional help by approaching a credit repair company or comprehend your credit worthiness and financial abilities on your own.
But, before you begin fixing your credit standing, you should keep in mind the misconceptions revolving around credit repair.
MakaanIQ busts a few myths associated with credit repair.
A bad credit score can never be fixed
A credit score is credit history which can be restored. Late or missed payments reflect on your credit report for up to seven years. You can reduce this time by settling the unpaid amount with the lender, which will later get reported to the credit agency. The lender will provide you the settlement letter which can be used to avail of the fresh loan. The older the negative information, the more insignificant it becomes. Also, the long credit history reports without any negative data or Days Past Dues (DPDs) increase your chances of getting a home loan. The credit report will also reflect the liabilities that might be inactive at present but will show the picture of how you have treated them. A bad credit report can be rebuilt but yes, it demands time and a little effort.
Professional help needed to rectify credit score
Many of us assume that in order to repair our credit, we must seek professional help. This is untrue. You can repair your credit yourself -- by logging on to the credit agency's website (www.cibil.com in case of CIBIL), for instance, and updating the credit information that might have been wrongly reported.
One score for all lenders
Owing to a rise in the number of defaults and complexities of credit risk, lenders use different credit scoring models. There are generic as well as specific/custom credit scores which are developed to anticipate risk for particular type of lending or customer. The most commonly used credit score by Indian companies is the CIBIL score.
More money in the account, better the credit score
This is completely false. Credit score is all about how well and timely you treat your debt obligations and bill payments. However, the bank account will affect the credit score when the cheque bounces due to non-availability of funds. The information gets reported to the collection department, which then shows up on a credit report.
Mere 10-day delay in payment will not be reported to the credit agency
Now, you are fooling yourself! A delay in payment even by a day will reflect in your credit report. The DPDs in the CIBIL report reflect the number of days by which the liability remains unpaid every month. You will have to justify the holdover of the Equated Monthly Instalment (EMI) or bill payment, even for a day, while applying for a fresh loan. You might also be asked to produce the supporting documents, if asked for.
With no credit history, it's difficult to get info
Lenders look for four core areas while assessing the borrowers' credit history - customer's identification, credit inquiries, account history and public records like bankruptcy or tax liens. But do you think that you can escape these parameters if you lack any credit history? Do not be surprised if the lender makes the co-applicant mandatory for your loan account, in such a scenario. The lender can also probe deep into your credit card bill payments to ascertain how timely did you meet your financial commitments. Bank account statements will also be used to gauge your financial status. In fact, the lender will go a step further by resorting to your social media profiles to understand your connections, assets and liabilities, past and present employers, etc.