January 27, 2020
TCP : ADVERTORIAL
Borrowing personal loans from a bank at a low interest rate is advantageous in several ways. You can utilize it to pay for your wedding expenses, a foreign trip or home renovation needs.
But before you apply for it, you must know that your loan eligibility depends on your credit score. In banking terms, it is just a three-digit number that shows your creditworthiness to a lender.
How much credit have you borrowed previously? Do you repay the debt timely or not?
Your credit score is the combined answer to all such questions.
When you apply for a personal loan, the chosen bank will check your credit score before approving the application. A high credit score makes you eligible for instant loans and quick approval, whereas your application may get rejected because of a low credit score.
The best part is that you can do your part in improving your credit score and maintain a positive credit history. It will increase the chance of getting an approval on personal loans whenever you need it.
Here are four things you need to do to increase your credit score:
1.Repay Your Existing Loans Timely
Have you already borrowed a loan, be it a bike loan or a home loan?
If yes, then you already have certain financial liabilities in the form of Equated Monthly Installments (EMIs). Paying the EMI on time is crucial to building your credit score.
Sometimes, financial emergencies come up out of the blue, which makes people fail to pay the EMIs on time. If this has happened to you as well, your credit history will reflect it. You can’t hide such things from the credit bureaus or banks. This may even degrade your credit report.
So, always ensure that you pay your existing EMIs timely so that it won’t intervene in your personal loan application.
2.Don’t Entirely Depend on Debts
If your regular earning is not enough to match your expenditure, you might think borrowing too much debt would help.
But it won’t. Instead, it may work against you and decrease your creditworthiness.
That’s because if you borrow multiple loans within a specific period, it tells a lender that you stay out of funds most of the time. It also means you already have several EMIs in hand to pay for, which may become the reason for not getting the personal loan you seek.
One way to live a debt-free life is to plan your expenses and save regularly. If you have already taken a loan, repay it first before you apply for another.
3.Start Using a Credit Card
One of the most common reasons why personal loan applications don’t get approved is the lack of credit history.
You won’t have any credit score if you haven’t ever borrowed money in the past from banks or other authorized lenders. In other words, no credit profile with past transactions means you are not eligible to get a loan. You can begin to create your profile by using a credit card for regular expenses.
A credit card can make your life easier in several other ways as well, be it giving you reward points and the facility to pay bills automatically. You must have self-discipline to manage your spending and pay the credit card bills timely.
4.Check Loan Offers You Get Before Accepting Them
As the very first step, every lender investigates your credit report to check whether to approve your application or not. Sometimes, it is hard to find the difference between a fake call for a personal loan and a truthful one.
Multiple credit history checks can have a small negative effect on your credit score. So, make sure you do not accept all the loan offers you get either on phone calls or emails. Check them thoroughly first before you apply for a personal loan.
By paying heed to these simple things, you can improve your credit score and get a personal loan you need to meet your life goals. Also, make sure you borrow the loan from a reputable bank, such as Axis Bank, that charges competitive interest rates on the loans.