No one can overstate the significance of a decent credit score, especially in today's age and time when credit has taken centre stage to build purchasing power. An increasing number of Indians are opening up to taking loans for their planned or unplanned expenses. Maintaining a credit score of 630 or above is critical to obtaining a Personal Loan online at competitive interest rates, whether to finance a wedding, fund a dream vacation, purchase consumer durables, or fill income gaps for other expenses. Although getting a personal loan for a low credit score is also possible, it often comes as a smaller loan at a higher interest rate.
Read on to learn five easy steps to improve your credit score and get the best deal on a Personal Loan.
The first step to improving your credit score is to know where you currently stand. Check your credit score online for free and plan your financial strategies accordingly. Tracking the credit score at frequent intervals helps build and boost it. Furthermore, thoroughly review the credit report, as it contains vital information regarding your unpaid EMIs, debt obligations, etc. Also, check the credit report for any errors or discrepancies that might be holding down your score. Regular review will help you understand the impact of your credit behaviour on your credit score, giving you enough time to change and correct.
Credit bureaus calculate the credit score based on the individual's credit history, behaviour, and habits. Those who haven't had any credit transactions must get started now. Opt for a small Personal Loan and a repayment tenure suitable to your monthly repayment capacity. Use the finances judiciously and build a good credit history with regular EMI payments. Although it may take some time to build credit and improve the score, efficient planning will soon take you to the 630 mark.
Consistent repayment is the golden rule to building, improving, and maintaining a good credit score. While paying the loan EMIs, ensure meeting the deadlines each time. Repaying credit on time will boost your credit score and position you as a trustworthy and reliable credit user. Consequently, it makes it easier to get more loans and credit cards in the future with the best terms and conditions.
Those handling several loans may find timely repayment a challenge. Such individuals might consider taking a personal loan on credit score for debt consolidation and bringing all existing credit bills into one. Set up the auto-pay option to avoid late EMI payments and build the score.
Another rule of thumb is to exercise caution while using credit for daily expenses. Handling multiple loans simultaneously without a robust repayment plan will increase the debt-to-income (DTI) ratio, which is not a pleasant parameter for lending institutions and credit bureaus. The DTI ratio is critical for credit score, so keep it below 30% to live a stress-free life. Moreover, use surplus funds to reduce the DTI ratio, get debt-free faster, and boost the credit score.
Personal Loans are excellent tools to increase credit scores through regular EMI payments. However, they need proper planning and regular monitoring. Firstly, choose a loan plan according to your requirements, eligibility, and benefits. Applying for a personal loan with a low credit score will lead to a hard enquiry but not approval of the application. Moreover, select a loan term with EMIs you can easily afford to pay each month. Together, these steps will help build a credit history and improve the score over time.
While following these suggestions to improve your credit score, get started with the first step now. An easy and quick way to check the credit score is through an online credit score checking tool available on the websites of top lending institutions like Clix Capital. Apart from checking the credit score, access your personalised credit report and get the most competitive loan deal on the same platform.
So, check your credit score and begin taking these steps towards sound financial health. Although getting a personal loan for a low credit score is feasible, improve it to get the best deal at the most competitive interest rates.
Amaira sharma is finance expert and former business growth strategist who has more than 8+ years experience in the industry, now she helps others to get better financial stability and standards. She loves to write useful tips on personal finance and businesses.