How to build a good credit score for personal loans?
Posted by IndiaLends on October 9th, 2020
Getting a good credit score is not a one-day task. You need to be financially disciplined to achieve that. For this, you need to simply focus on understanding the factors that impact your credit score and take conscious measures to improve it. If you keep at it, you can easily improve your score over time and qualify for the best personal loans. The minimum CIBIL score for personal loans is 750 and above. Have a look at some of the tips that will help you improve your credit score.
1. Keep a tab on your credit report: The errors in your credit report can bring your credit score down. Therefore, you need to check your credit report and ensure that there are no errors in it. If there are errors, contact your lender or credit bureau to fix the errors.
2. Make your outstanding payments on time: You should always aim to pay your outstanding credit card bills and loan EMIs on time. Even a single missed payment will leave a severe impact on your credit rating which can affect your eligibility for credit products whenever you apply the next time.
3. Do not max out your credit card limit: Your credit rating will be impacted if you exceed your credit card limit. It will further increase your credit utilization ratio and could lower your credit score which will adversely affect your eligibility for credit products. Therefore, you should keep your credit utilization ratio up to 30%.
5. Keep your older accounts active: The length of payment history also plays an important role in the evaluation of your credit score. Hence, it is advisable to keep your older accounts active. You should not close them if you have a few defaults. This is because a default will stop impacting your credit score after a year and is removed from the report after two years. Newer accounts do not get you a high credit score since there is not enough length to observe a pattern.
6. Make frequent use of your credit cards: If you own a credit card and you are not using it, then it is of little use. You must try to utilize the benefits of your credit card by using it frequently. Collect cashback/reward points offered on the card and redeem them for your benefit. This will also help you boost your credit score.
7. Do not file multiple applications: When you apply for a loan or credit card at too many places simultaneously, it will affect your credit score. This is because it will show your hungry credit behavior to the lenders and thereby reducing your chances of credit approval.
8. Keep your credit diverse: Financial institutions also notice the type of credit that you have borrowed in the past. The capability of a person to juggle and maintain efficiently, different types of credit is seen as a positive thing. Ensure you have different types of credit in your credit history to achieve a good credit score.
CIBIL Score for personal loans holds importance if you want to get quick approval and low-interest rate. You can easily check your credit score online on any FinTech's portal or by visiting the credit bureau website. All you need is to provide your details such as PAN Card and, name, contact number, etc.
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