If you focus on understanding how numerous factors impact your score, you can take cognizant measures to improve them. A good credit score will ensure better terms of personal loan and you may be able to negotiate for better and lower interest rates on your personal loan.
The major question arises - What is a good credit score? A credit score of 750+ will ensure faster access to your personal loan and also will ensure that the lender offers a better loan amount at a lower interest rate.
1. Make Timely payments
The credit reports show the pending and unpaid EMIs alongside the dates and number of days for which they have stayed unpaid. This data is reflected in your credit report. Use suggestions to assist you with normal installments and set up auto installments to make every installment on schedule.
2. Check your Credit Information Report Regularly
Make it a propensity to check your credit report consistently. This will assist you with following any default or late installments that you may have brought about. In some cases, the data identified with installments and credit conclusions may have not been refreshed or there might be a blunder in your report. Normal checking will assist you with recognizing and fixing such mistakes. You can purchase your credit report and financial assessment from CIBIL for a charge and it is made available to you inside 3 business days.
You can fix the mistaken data in your report by starting the question goals process at CIBIL. You can decide on CIBIL's online question process for nothing. There are factors like non-installments because of employment misfortune or occupation movement that can be fixed by making convenient installments once you are settled or monetarily steady. At some point there are debates between the loan specialist and the borrower, for example, knowledge on yearly charges or questions by virtue of extortion on your cards. These should be settled by the candidate legitimately with the bank or the loan specialist so your record as a consumer isn't influenced.
3. Limit your Loan Enquiries or Applications
As mentioned earlier, every time you apply for a loan, the lender approaches CIBIL for your credit score. This is known as a Hard enquiry. Each enquiry is recorded and affects your credit score negatively. Therefore, avoid applying for loans and credit cards with too many lenders at the same time. You may consider waiting for the lenders response about the loan approval before applying with other lenders.
Many applications will reflect your need for more credit. An impact on your score will only bring down your creditability.
4. Avoid settlements of loans and credit card
When people are unable to pay their loans and credit card bills, they tend to opt for settlements. This means that a certain amount is agreed upon by the lender and the borrower to close the loan. The amount is lower than the main outstanding amount.
Settlements are recorded in your credit information reports and lowers your credit score.
5. Avoid taking too many loans at same time, use credit prudently
Too many active loans show that you are someone who needs to borrow money constantly to manage his/her finances. Therefore, it is not a clever idea to have too many active loans at one time.
If you wish to maintain a good credit score, try to repay the existing loan before taking a fresh one.
6. Opt for a combination of mixed forms of debt or credit
There are basically two types of loans available in the market, secured and unsecured. The home loans or education loans where you provide a collateral to get a loan are termed as secured loans.
If your portfolio reflects too many unsecured loans, it may have a negative impact on your score. Therefore, opt for credits of both types to maintain a balance of your financial portfolio. This will also help you create a sound credit history.
7. Opt for longer tenure on your loans
When the tenure of your loan is more, your EMI will be considerably lower. A smaller EMI amount would mean less chances of defaulting on payments. When you don’t default and make regular payments for your loan for an extended period of time, your score will improve.
8. If rejected, do not reapply immediately
If your loan application or credit card application gets rejected by one lender, do not reapply immediately with another vendor. Your first rejection is recorded in the credit report. If the new lender checks with CIBIL before approval, there are chances of your application getting rejected again.
Thus, before you access credit, you must ensure that you have the right credit score and have taken good care of the factors that will affect your personal loan application approval.