A Credit Shield Protects You By Waiving Your Outstanding Payments, Check Credit Score To Get A Better Idea

Lenders offer new credit card applicants the option to have credit shield insurance coverage. Almost all inexperienced users, however, decline the offer. For them, it is an additional expense. They understand their mistake only when something they never even imagined happens.

Credit shield waves off the outstanding dues of your credit card in the instance of an untoward incident that deprives you of your income. Death, permanent disability due to illness or accident and loss of job fall in this category. It is the protection you can offer your dear ones in the instance of your death. But to get this offer, you need to have a higher credit score. And keeping track of it alone would not help. You must know the factors that affect it and do the needful. Given below are a few among them:

Credit mix

Credit mix, if done right, will combine secured and unsecured loans. A secured loan needs collateral. And an unsecured loan does not need it.

If your credit report shows that you have this mix of loan, you present yourself as a reliable customer. Paying them all on time adds up to the confidence prospective lenders will have on you.

Negligence in loan repayment

Your CIBIL information report displays the history of your loan repayments. The more defaults and late payments you have, the lower your CIBIL score will go. Such records show to your lender that you are a high-risk or irresponsible borrower. Quite naturally, they will think twice before approving your loan application.

Your income

No lender is concerned about your income. But it determines your strength as a borrower. And this is going to have an impact on your credit score. You will pay on time only if you have the financial strength to do it.

Credit inquiries

This is something your prospective lender will look up keenly on your credit report. When you apply for credit cards, they show up on your credit report as they come your way. This creates the impression that you are a credit-hungry customer. It will not only hurt your score but will also alienate lenders from you. This will take it down up to 20%.

Length of your credit history

The age of your credit report is another factor that influences your CIBIL score. It informs the lender of your financial strength. They also come to know that you are there in the system for a while. This makes it easier for them to evaluate your creditworthiness. Most of them would want to do anything with a new applicant. A lender may approve your loan application. But the rate of interest is going to be pretty high.

Debt to income ratio

This is an insight your prospective lender would never want to miss. The person or agency checks the number of open accounts in your credit report. And the more you have, the farther your lender will go. You are already burdened up with monthly instalments.

Your outstanding debt is another thing that will negatively impact the numerical representation of your loan-repayment ability. Pay all your outstanding dues on time. Otherwise, lenders will reject your loan application without a second thought.

Ratio of secured vs. unsecured loans

If the number of your secured loans is higher than that of unsecured loans, you present yourself as a reliable borrower. And it is going to have a boost on your CIBIL score.

The credit shield

As mentioned above, a credit shield is an invaluable protection you can have at a small monthly charge. Lenders may even offer add-ons like credit shield unemployment or credit shield plus. Every policy will have its own terms and conditions. They even may vary from lender to lender.

See to it that you are fully aware of the protection offered and exclusions. Be informed of your rights and the process of filing for a claim.

Here too, your CIBIL score would have the final word. If it is below 750, you will have a tough time availing of a new credit card or loan.

Maintain a good credit score, download a free CIBIL score app and monitor it on the go.