Maintaining a good credit score is essential to ensure financial fitness. A good credit score helps you take loans at a reasonable interest rate. You can take advantage of the best offers available on loans and other forms credit with a good credit score.
Usually, a higher interest rate is charged for borrowers with a low credit score. Many lending institutions need a minimum credit score for Personal Loans of 750 to grant loans. However, the new-age NBFC Clix Capital can offer an instant personal loan to those with an Experian credit score of 630.
A credit score is like your history that helps loan providers determine how well you are with matters related to handling debt, such as repayment of dues, and reflects your creditworthiness.
Maintaining a healthy credit score requires specific guidelines. Here is a description of the various measures you need to undertake to keep up a good credit score.
- Regular monitoring of credit report
You need to monitor your credit report regularly. Suppose you take a loan from a financial institution and pay the amount in full. The institution closes the loan but fails to inform consumer credit reporting companies like Experian. Although this is a rare possibility, if you check your credit score regularly, you’ll know if its affected. You can correct it and keeps such errors in check by being a little proactive.
- Credit utilisation ratio
Credit utilisation is a crucial factor affecting one’s credit score. Taking credit too often or maximising the credit limit regularly can adversely impact your credit score. It is recommended that you must spend nearly 30% of the net credit limit to ensure that your credit score stays stable.
- Maintaining old credit accounts
Repaying all your old credit accounts and still holding them helps you improve your credit score. Timely payments made on old loans can enhance your credibility and help maintain your credit score. A fair practice is to not close your old loan accounts as a long credit history helps strengthen your credit score. If you have old credit accounts, it is advisable to keep them open if there’s no fees attached to them.
- Applying for a single loan instead of multiple loans simultaneously
A fair practice to maintain a good credit score is to apply for a single loan instead of multiple loans after going through the personal loan eligibility criteria for all to ensure that you apply with a loan provider that suits your requirements. If you are not doing well financially and seek numerous loans simultaneously, it may adversely impact your credit score. When you apply for multiple loans, many hard inquiries for your credit score by different loan providers can impact it negatively.
- Paying Credit card Bills on time
An essential element of maintaining a good credit score is paying all outstanding dues promptly. Utilising features such as autopay can help you make timely payments without even clicking a button. A delay in payments can affect your credit score adversely.
- Choosing the most suitable loan tenure
When applying for a loan, choose a suitable tenure. Make sure to create a repayment strategy that allows you to make timely payments in the future. It can adversely affect your credit score if you select a short tenure for your loan but fail to make timely payments. - Personal Loan for low credit score
It is important to maintain a good credit score. However, the credit score can drop due to unfavourable events, leading to further financial difficulties. If your credit score is low, getting a guarantor or a co-applicant for your loan would help increase the chances of getting your loan approved. You can also try applying for a lower loan amount.
Make sure to check your credit report for errors if you notice a drop in your score.
Conclusion
It is challenging to get a loan without a good credit score. The simple measures discussed above can help you maintain a good credit score for a Personal Loan. If you have a low credit score or have never checked your credit score before, it is best to start building it and lay the foundation for a good credit history.
