How you can improve your credit score

Sunil Jhaveri has been negotiating a good deal for investing in a property. He is a practicing doctor with a high income and good savings. He has plans to build assets so that he can set up his own hospital in the future. However, when he approached his bank for a loan, it refused, citing a poor credit score due to an unpaid credit card bill. The episode had taken place a long time ago, and Jhaveri had completely forgotten about it. What can he do now to ensure that he is not refused a loan in the future?

Jhaveri should be aware that things have changed considerably from the time that it was easy to acquire loans and credit cards with limited documentation. Today, banks refer to the credit information bureaus to check the credit history of a borrower. If the borrower has a poor record of repayment, or instances of default, banks may refuse loans.

The need for Jhaveri to have a clean track record is even more important as he plans to take a loan for his hospital and might need more credit to build and run it. He can request for a credit score from the Credit Information Bureau. He should then initiate the process of cleaning up his record. For this, he should get in touch with the bank whose credit card payments he had defaulted on, and seek a negotiated settlement.

He should also request the bank to notify the bureau because his credit score will be modified only after this. He can then go back to the bank for fresh loans.

Jhaveri should keep in mind that good credit habits are immensely helpful while applying for loans today. He can avoid any delay in processing if he has a good credit history and score. As a professional with varying income levels, and the need for loans to move ahead in his profession, this becomes even more important to establish his credentials with his lenders.

The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre and Arti Bhargava.