Your credit score is essentially what determines the probability of the approval of your loan application. Besides, it is the most crucial factor when it comes for the lender to decide upon the ideal Personal Loan Interest Rate for you.
Whether you wish to gain access to some additional funds for purchasing a home, a car or an expensive appliance, or you need some credit to fund your business, a good credit score is a must. Depending on the purpose and type of your loan, a score between 650 and 850 can be considered good. Scores ranging from 750 to 850 are supposed to be exceptionally brilliant and can help you gain access to various unsecured loans at competitive interest rates.
So, what if your credit score isn’t good, or say is less than 650? Well, in that case rather than applying for a loan with the fear of getting rejected or that of being offered high Personal Loan Interest Rate, we recommend that you wait for 4-6 months before filing your application. In the meantime, you can resort to one or more of the following tips, to improve your credit score.
You must understand that you can order a free copy of your credit report every year from all three of the leading credit bureaus in India – Experian, TransUnion, and Equifax. This implies that you can get your report once every four months and review the scores. Besides, you can also look for discrepancies, if any, in the reports and get in touch with the bureaus to get these rectified.
Thanks to the digitisation of the bureaus, it has become relatively easy to raise issues online, and get them addressed within as little as 2-5 days. Of course, some issued may take longer to get resolved, but more often than not, their resolution will have a positive impact on your credit report.
Not only will this simple step help you stay updated with your credit score, but point out the disparities can also help boost your score.
This may seem too obvious, but truth be told, not many people take the time or the effort to review their Credit Card statements, which can actually have numerous benefits. One of the most important benefits, in this case, is that you can spot any fraudulent payments that a hacker may have made using your card. Yet another advantage of analysing your statements is that you may have missed out on certain crucial payments such as the annual renewal fee on the card. Not only will such missed payments result in a late charge but will also get reported to the bureaus, thereby harming your score.
Of course, Credit Card companies determine credit limits based on your income as well as your repayment history. However, if you have been using the card for at least a year or more, with no defaults, if you merely ask for an increased limit, the company will often oblige you. This will primarily help you in bringing down your credit utilisation ratio (CUR), which in turn will help stabilise or even boost your credit score within a few months.
Of course, you must only use the increased credit limit to better your score, and not to make additional purchases. This will not only strain your personal finances but can also lead to a further blow on your already low credit score.
Yet another way to increase your credit limit is to open another Credit Card account, only for the sake of it. The trick is to not carry any balance on the new card while keeping everything else, as is. In this case, getting a card with no annual fee will largely work to your benefit.
Regardless of your actual credit limit, a good practice is to spend only worth 30% of the monthly limit using your card. It signals to the bureaus that you are financially sound, and are not extremely dependent on borrowed funds to meet your day-to-day expenses.
Whether it is a pending phone bill, or your Credit Card dues, whether it is your insurance premium or your Home Loan EMI (equated monthly instalment), make sure you make all payments in time, without any delay whatsoever.
Your repayment behaviour significantly impacts your credit score, and hence, it is in your best interest to not delay any payments, even if that means you have little for you to spend on your own living expenses. It may seem difficult to begin with, but once you are done paying the outstanding dues, both your financial condition as well as your credit score will start showing an exceptional improvement.
When you have too many loans to take care of, it can be a little tricky to pay all the related EMIs on time. Moreover, some investments, such as Credit Card dues may attract a higher interest rate, thus further oppressing your ability to repay the debts efficiently.
Needless to say, all of this can prove detrimental to your credit score. To avoid this, you can consolidate all your debts, especially the ones with high interest rates into a comparatively inexpensive one such as an HDFC Personal Loan. This step will help you in clearing your dues in time, thus helping you maintain better financial discipline. With time, debt consolidation will also help you improve your score.
We hope that the above-mentioned tips will help you fix and improve your credit score in the most efficient manner possible. Once that is taken care of, you will find it exceedingly easy to get approved for low Personal Loan interest rate, which will evidently make your life, at least on the financial front, much more comfortable.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.