Introduction to Maintain Good Credit Score
The market for personal loans in India grew by 20.4% between 2017 and 2018. The main reason behind this growth is the availability of such credits from various financial institutions.
Personal loans come with no end-user restriction. They can be used to fund any financial requirement, including medical emergencies, higher education, travel, marriage and more. However, individuals should meet the eligibility criteria of the lenders to avail such advances.
A credit score is one of the main criteria an applicant has to meet to avail a personal loan across favourable terms. Financial institutions determine the creditworthiness of an applicant with the help of their CIBIL score.
It is a 3-digit number between 300 and 900 that is based on the credit history of an individual. It is crucial to maintain a good score as loan eligibility and terms vastly depend on it. Here is a list of things you can do to improve your personal credit score.
Make your payments regularly
Repayment of outstanding debt can significantly affect the CIBIL score of the borrower. They must make sure to pay the EMI’s on existing loans and other dues well before the due date. Also, they can set timely reminders for such payments, so they do not default any EMI and improve their CIBIL score.
Avail a mix of different forms of credit
Availing only unsecured advances reflects financial instability of an individual. Borrowers can avail a healthy combination of secured advances like home loans and unsecured credits like personal loans to improve their CIBIL score.
Limit your credit utilisation
The credit utilisation ratio is the calculation of the credit usage of a borrower compared to their credit limit. A borrower may seem to be credit-hungry if the ratio is too high. Borrowers have to limit their spending on credit cards to reduce this ratio. They should try to keep the ratio within 30% to ensure that it has a positive impact on their CIBIL score.
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Reduce your debt obligations to improve credit score
If a borrower has a habit of availing multiple advances in a short time, it can harm their CIBIL score. They should consider repaying their outstanding debt before they apply for another credit.
CIBIL score is also dependent on the debt to income ratio of an individual. If a borrower reduces their debt obligations, they will automatically reduce their debt to income ratio as well.
It shows that the concerned individual has a sizable income, which can be utilised to pay a new debt and subsequently increases the CIBIL score. The required CIBIL score for personal loans is 750 although this varies between lenders. However, such a CIBIL score does unanimously help avail the most beneficial terms on the credits.
Opt for a longer tenor in case of loan
Borrowers should opt for a long tenor whenever they choose for a loan. It reduces the EMI amount and makes it easier for individuals so that they do not default on their payment.
However, a longer tenor can also increase the total cost of a loan significantly. So, borrowers should opt for such advances from a lender which offers flexible tenor to suit the repayment strategy.
Bajaj Finserv is one such NBFC that offers personal loans with an extensive range of tenors ranging from 1 year to 5 years. Furthermore, they provide a wide range of other benefits, including minimal documentation, online account management and more.
They also provide pre-approved offers to make the process of procuring such credits hassle-free and quick. Pre-approved offers are applicable on secured credits like home loans and unsecured credits like business loans and personal loans along with numerous other financial products and services.
You can check out your pre-approved offer by sharing a few necessary details like your name and phone number.
Check for mistakes in your CIBIL report and rectify them
Credit bureaus at times, make mistakes in updating the credit records of a borrower. It can bring down the credit score of an individual due to the presence of the wrong information in the report. Borrowers should check their credit report from time to time to ensure that there are no such discrepancies. If they find any error, they can submit a CIBIL dispute resolution form to rectify the mistakes and improve their CIBIL score.
Borrowers can improve their CIBIL score by following the points mentioned above. However, they can also avail personal loans with low credit scores from specific lenders if they require funds immediately.