For any potential investor in property, the quest always revolves around finding and selecting options that align with their available funds and capacity. However, there are instances where the need for a loan arises due to a shortfall in funds. While loans may sometimes be easily accessible, there are occasions when both banks and non-banking financial institutions decline loan requests. In such scenarios, the investor might still find a good asset slipping through their fingers. It’s crucial to recognise that with a slightly higher investment capacity, the returns from investments can also increase significantly. This situation is akin to a thirsty person reaching a well. To achieve this, attention must be directed towards one’s credit score and improving it.
The credit score is a tool that can turn you into a winner in the investment market. But how does it work? Before delving into that, let’s understand what credit value actually is. Credit score or value is a standard determined by financial institutions or banks. They assess your sources of income, along with your financial discipline and liabilities. This assessment is based on certain predefined criteria. It’s not necessary that if you have a good monthly or annual income, your credit score will also be good. It’s possible that despite having a good income, your credit limit may be low. In such cases, your investment options might be limited. To become a savvy investor, it’s essential to pay attention to the key factors determining your credit value.
The Importance of Bank Statements
A bank statement is a report card that reflects your income and expenditure. To determine the credit limit, banks and financial institutions often request bank statements from the past six months. This helps them understand a person’s sources of income and spending patterns.
Avoiding Cash Transactions
If your income comes from a source where you receive cash, you might inadvertently make mistakes according to banking calculations. In such cases, opt for transactions such as checks, bank drafts, banker’s checks, or digital payment methods whenever possible. While cash transactions may save you on taxes, they can also damage your valuable credit limit.
Financial Discipline
Sometimes, a check issued by someone bounces due to various reasons. Such information can be obtained from the bank’s passbook or statement. Bounced cheques not only indicate a lack of financial discipline but also signify economic vulnerability. Therefore, take this seriously because banks and financial institutions view it negatively during credit score calculations.
File Your Taxes
To increase your credit value, it’s essential to deposit the correct returns. If you are a business owner, only your income tax returns can accurately reflect your income. Failure to file income tax returns may require Form 16A, but it’s based on the income declared by you. You might be surprised to learn that a good bank statement and accurate tax returns can significantly enhance your investment capacity by nearly tenfold. For example, with just a capital of 200,000 rupees, you can invest up to 1.5 to 2 million rupees. This increased investment capacity will undoubtedly boost your returns over time.
Conclusion
Enhancing your investment capabilities by paying attention to your credit score is not just about accessing loans; it’s about maximizing your potential in the investment market. By focusing on financial discipline, avoiding cash transactions, and ensuring accurate tax filings, you can significantly improve your creditworthiness. This, in turn, opens up a plethora of investment opportunities that were previously out of reach. So, whether you’re a seasoned investor or just starting, remember that your credit score is a powerful tool that can shape your investment journey and lead you to financial success.
The author is founder Homents. Views are personal.
Published: May 4, 2024, 10:30 IST
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