Your credit score is essentially the numeric rating given to you on the basis of your repayment behaviour. This score is assigned on the scale of 300 to 900, where 300 – 500 denotes deplorable conduct, while 700-900 denote an exceptionally responsible attitude towards your credit. Anything between 500 and 700 is considered mediocre. Your credit score helps your lender gain an insight into your behaviour as a borrower. Evidently, if your score is high enough, you can easily procure big-ticket credits such as Standard Chartered Personal Loan, if not, you may find it tricky to acquire the desired Personal Loan interest rates.
Given the astounding significance of credit score, it is essential for you to maintain a respectable score. If you haven’t been able to keep up a good score, or simply want to take charge of your financial situation, here are a few ways that can help you improve your score:
One of the most important measures that you can take towards improving your score is that you inculcate the necessary discipline, especially when it comes to paying your equated monthly instalments (EMIs) on time.
It is because a delay in paying your EMI, or a default in the same, will not only attract a penalty from your lender but will also give an unsolicited blow to your score. Hence, make it a point to pay your EMI on time without fail, whether you have to do it by setting up reminders, or using an app or service that ensure auto-payment of the EMI.
If you have more than one Credit Cards, you may be tempted to close the older ones who don’t serve the designated purpose anymore. If such cards do not attract an annual fee, then it is highly recommended that you keep your old Credit cards. The reason behind this is the longer your credit history, the better it is for your credit rating.
Also Check: Credit Policy of Banks
One of the crucial factors that determine your credit rating is your credit utilisation ratio (CUR), i.e., the ratio of your spending to the ratio of your credit limit. For instance, if you spend Rs. 50,000 using your Credit Card, with a credit limit of Rs. 1 Lakh, then your CUR is 50%. Ideally, your CUR should be less than 30%, since it is an indication that you are in control of your finances, and are not dependent on credit for managing your day-to-day expenses. To make sure that your CUR remains as low as possible, you must get your credit limit increased. You can do so by requesting your bank, if you are a loyal customer, or by having more than one Credit Cards. In the case of latter, the credit limit of each card adds up, thus bringing down your CUR.
When you procure a loan, make sure you opt for a longer tenure. This will help minimise your EMIs, thus ensuring the least possible impact on your current finances. It will also make it easier for you to pay the EMIs month after month, without fail thereby assisting you in maintaining your score at the desired level. Of course, as and when it seems possible, you can prepay the loan in part or full. This will help you in saving on the interest outgo in the long term.
In the present day scenario when procuring loans has become simpler than ever before, you may get tempted to take financial assistance at every level possible. However, this may adversely impact your credit score. Taking multiple loans will alert the credit bureaus indicating that you are in a constant cash crunch and that you are unable to manage your finances efficiently. Hence, you must take a loan only once you have repaid an existing loan in full. This will, in turn, boost your credit score.
In a vast majority of cases, it has been seen that credit reports are plagued with one or more mistakes. These discrepancies may harm your credit score, without you having any information about the same. Hence, make sure you carry out a detailed analysis of your credit report every six months. Not only will this help you stay updated with your current score, but will also help point out the mistakes in your report. This will eventually help boost your score.
If you don’t have a credit score under your name, it is recommended for you to build your score by procuring different types of credits. Here, you must first get a Credit Card which will necessarily act as a short-term loan. You can then opt for a secured car loan or an Unsecured Personal Loan. The idea is to pay off your Credit Card bills as well as your EMIs in time. Not only will this assist you in boosting your credit score, but will also ensure that you can procure new loans as and when required, that too on favourable terms.
We hope that you are now aware of some of the simple yet promising measures to improve and maintain your credit score. So, what are you waiting for? Start implementing these measures right away, so that the next time you set out on the search of credit, you can rest assured of finding the lowest possible Personal Loan interest rates!
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