This metric is especially important for lenders when you apply for unsecured forms of credit such as a personal loan. This is because the lender doesn’t have any collateral to fall back on.
Having a good credit score is not only beneficial for approval, but also aids in tipping the scales in your favour in terms of the interest rate and loan amount.
So, if you intend to apply for financing, review your credit score and take these steps to give it a boost, if need be.
Make timely EMI and bill payments
Around 30% of your credit score is based on your payment history, so this is one element that you must get right.
Depending on whether you are disciplined with repayment or frequently Miss EMIs, your score will rise or fall. In fact, you can lose as many as 100 points by defaulting on or delaying payments.
Today, with the option of automation, delinquencies can be greatly mitigated. To ensure that you are making a marked improvement, pay more than just the minimum due and avoid late payments at all costs.
Consolidate outstanding debts
If keeping a track of your outstanding dues is proving to be difficult and time-consuming, causing you to miss deadlines or default, consider consolidating them.
Apart from eliminating chances of missing due dates, a significant benefit is that you can clear your outstanding dues at a lower cost. For instance, you could avail a high-value, top-up loan on your existing home loan and use it to consolidate debts.
This way, you save on the total interest payable as this loan is likely to have an attractive interest rate. You can eliminate penalties as well, as you have a single loan to manage once you consolidate. On the whole, you can improve your credit score greatly through this tactic.
Pay attention to your credit report
Discrepancies in your credit report can bring down your credit score for no fault of your own. To avoid this outcome, it’s important that you periodically conduct a credit report check. Free CIBIL score checks are possible through CIBIL’s website and on reviewing your report you can take steps to rectify errors, if any.
Avoid making multiple loan applications at once
When you apply for credit, it is a noted as a hard inquiry in your credit report and this causes your score to drop by 3 to 4 points. While this may seem insignificant, if a credit bureau receives 10 hard inquiries at once, for instance, your credit score will drop by 30 to 40 points!
To ensure that this does not happen, apply for a loan with one lender at a time. Apply only for those loans where you match all eligibility criteria. You can use an eligibility calculator online, on a lender’s website, to determine if you are a good fit.
Ensure that you have a mix of different types of credit
Having a good blend of secured and unsecured credit can help you increase your credit score, as around 25% of your score is based on credit types and duration.
Having secured loans, such as a home loan and unsecured loans, such as a personal loan, attests to your ability to handle various types of borrowed funds. It indicates that you have experience managing different tenors, loan amounts and interest rates and this works to your credit score’s advantage.
The benefit of having a high credit score is easy access to loans such as the personal loan from Bajaj Finserv. With a score of around 750, you can secure financing of up to Rs.25 lakh at a cost-effective rate and get disbursal within 24 hours of approval.
You can repay your loan over a tenor spanning up to 60 months and use the flexi loan facility to get financing on the go. It facilitates multiple withdrawals without fresh applications and levies interest only on the amount you use.
Moreover, it allows you to reduce your instalments by up to 45%. You can enjoy this benefit by paying interest-only EMIs for a part of the tenor.
To obtain this personal loan on simple terms and get quick financing, ensure a sound credit score and check your pre-approved offer.