Watch out! Use of Fintech services may damage or destroy your credit rating
Advances in technology and the growth of startups have made it easy to use small credits from Fintech companies almost immediately without much paperwork.
Features like Buy-Now-Pay-Later (BNPL) or EarlySalary or any of these small, nicely packaged zero EMIs with the flexibility to pay back within three months to six months, including some cards, are extremely convenient tools that allow you “Buy the products you want. They have a very fast turnaround time, very easy access to funds, and therefore you are able to buy the things you need, or get the cash for the cash you like,” said Santosh Joseph, founder and managing partner, Germinate Investor Services LLP.
However, you can not overlook the refund plan for such a service just because the size is small.
This is because when you use such a service, your CIBIL account will reflect a new loan account. The more Fintect products you use, the more will be the number of loan accounts.
Not only will such services be reflected as loan accounts, but will also affect your CIBIL score.
So by strictly following the repayment schedule, you can improve your CIBIL score through Fintech products.
“Under normal circumstances, when your credit score is bad and you use these types of loans where you can get a loan much easier than a regular loan, if you end up repaying with a good consistent track record, your credit score will actually go up and it can help you recover your bad credit score, ”said Joseph.
On the other hand, you could damage your CIBIL score by ruthlessly using such Fintech services.
“The worst that can happen is, if you take out such loans and even though they have shorter time frames and faster processing periods, if you ever bounce these, your actual credit score will be beaten,” Joseph said.
So, Fintech services not only provide easy access to small credits, but also allow new creditors to build a good credit score before applying for a loan.
By using such a service, individuals who already have CIBIL scores can quickly improve or reduce it.
“So, these are actually tools that can be helpful in reviving or improving your credit score. Therefore, if these things go bad, your credit score will actually go wrong, and instead of getting better, your credit score will get worse. The convenience tool you used actually does more harm than good over a period of time, “said Joseph.
