The financial sector has seen tremendous growth in that past decade, and with that, the personal loan market has also seen an increase. While getting a personal loan is a quick and easy process, the eligibility criteria determine the amount of loan that the applicant will be eligible for and the interest rate at which one will be offered the loan.
Some Eligibility criteria are:
- The age of the applicant must be between 21-60 years f age.
- The applicant must be a resident citizen of India.
- Must have a minimum, Rs 20,000 income.
- Must have a good credit score.
While the other factors are well understood, the applicants tend to get confused on the last point. What is a good credit score? And how you can improve their credit score? All these questions will be discussed in this article already.
What is a Credit score?
A numerical expression in the range 300-800 analyzing an individual’s credit files, Credit score represents the creditworthiness of an individual. It is primarily based on the credit report, provided by the credit bureaus.
How is a credit score calculated?
The credit score is calculated by credit bureaus by applying a mathematical algorithm to the credit reports of individuals. The credit score calculator may vary based on different lenders as the algorithm for computing also varies for each financial institution.
5 tips to improve the credit score of a personal loan
The credit score is an important parameter if you are looking for Fullerton India instant personal loan. In this it is important to know how you can improve your credit score:
- Pay your dues: You can use your credits to pay any household bill, emergencies, shopping bills, or even your vacations. The more your payment, the better your credit score. However, it is important that you pay all your dues on time. This is because your past payment performance is usually considered a good predictor of future performance. A delay in the payment can lead to a negative impact on your credit score.
You can positively impact the credit scoring factor by repaying your bills on time each month. The bill payment not only includes the credit card bills, but also any loans that you might have pending like auto loan, student loan, rent, phone bill, utilities, and many more. You can use the resources and tools available by your lender for automatic payments to ensure that your payment is done timely.
- Don’t close the credit accounts: Closing a credit account, zeroes down your entire credit history related to that particular account. Closing an account may increase your credit utilization ratio high. Owing the same amount but having some open accounts may lower your credit scores.
- Do not use over your credit limit: Though you may have a good credit limit on your account, but utilizing over the limit can also negatively impact your credit score. Going over your credit limit not only triggers over-limit penalty but also adversely impacts your CIBIL score as you tend to exceed your CUR (Credit Utilisation Ratio) over 30 percent
- Keep a check on your credit score: From time to time, you should keep checking your credit reports for any inaccuracies. Any incorrect information will drag down your scores. Verify that the accounts listed are correct, in case of errors get them correct soon.
- Mix your credit accounts: Only having a single account might not reduce your credit score, but having multiple credit accounts of different types will help improve your credit score. So you have to ensure that you borrow a healthy mix of credits, both secure and unsecured Mortgage Loans, of a long and short tenor to build a strong credit score.
The above mentioned are some habits that will help improve your credit score over time. While they are not magic wands that will immediately change your score, it may take up to 6 months or years for your credit score to improve.