Improve Your Credit Score Immediately to Get Your Loan Approved_Banner_WC
Improve Your Credit Score Immediately to Get Your Loan Approved_WC
Since demand for loans has increased multi-fold over the last few years, lenders have also become stringent about borrowers meeting the loan eligibility criteria. Lenders assess a borrower's application against several different factors, such as their age, income, number of working years left ahead of them, current debt-to-income ratio, credit score, etc.
The credit score is one of the key factors that affect home loan eligibility as well as home loan interest rates. Lenders give high weightage to credit scores and credit reports when deciding on a borrower's loan application. Before getting to how to improve credit scores, let us understand how a good credit score helps borrowers.
Here's How a Good CIBIL Score Proves Helpful
If your CIBIL score check shows a credit score of 750 or above, it's a good thing. Anything between 750 and 900 is considered a very good credit score and here's how such a credit score helps a borrower.
It Ensures Quick Approval
A credit score between 750 and 900 is a sign of a reliable and trustworthy borrower. Such a credit score belongs to an individual who has always paid EMIs on time, cleared card payments before due dates and has been a responsible borrower through and through. It is therefore not very surprising that all lenders want to work with such borrowers and thus when a borrower with an impeccable credit score applies for a loan, they get approved for a loan quickly.
It Ensures Beneficial Loan Terms and Conditions
If your credit score is 750 or above, lenders will try and lure you with the best loan deals. Thus, you will be offered the lower interest rates when you apply for a loan, you may also be allowed to repay the loan over a longer tenor. Most importantly, your lender may even agree to sanction you a loan amount higher than you are eligible for.
Apart from this, good credit history also allows borrowers to avail of the best credit card deals.
If your CIBIL score is below 750, do not worry. The good news is that the CIBIL score can be improved. Here are a few tips on how to improve credit score.
How Can I Improve My CIBIL Score? Here are a Few Tips That Will Help
Maintain a Clean Payment History
Your credit history is one of the key factors that affect your credit score. Credit history makes up 35% of a person's credit score. Late payments, credit defaults, etc. stay on an individual's credit report for 7 years. Details about more serious events, such as bankruptcy, stay on a person's credit report for over 10 years.
Therefore, to improve credit score, borrowers must maintain a clean credit history. This means they must pay credit card bills on time, clear EMIs before due dates and never default on loans. Taking a loan after proper planning certainly helps borrowers keep their credit history clean.
Limit Loan and Credit Card Applications
If you are working on improving your CIBIL score, limit credit card and loan applications for a while. Apply for a loan or credit card only when absolutely necessary. When a borrower applies for a credit card or loan, the first thing that a lender does is send an enquiry to the credit information bureau they work with and enquire about the borrower. Such enquiries are known as hard enquiries. Too many hard enquiries show a borrower to be hungry for credit and reduce their credit rating. Hard enquiries makeup 10% of a borrower's credit rating and therefore, one must abstain from credit when one is trying to improve their credit score.
Maintain a Credit Utilization Ratio of 30% or Lower
The credit utilization ratio is the ratio of credit used to credit available and it makes up 30% of one's credit score. Borrowers who use too much credit available to them come across as reckless and extravagant spenders and lenders do not like working with such borrowers.
Many borrowers make the mistake of paying only the minimum due on their credit cards. Borrowers do not know this but doing this reduces one's credit utilization ratio as well as one's CIBIL score. So, do not clear just the minimum due. Instead, try to clear the entire pending amount each month and make it a point to maintain your credit utilization ratio below 30%.
Maintain a Healthy Credit Mix
The credit mix you maintain also has an impact on your credit score. The credit mix you opt for makes up 10% of your credit score. Therefore, if you are trying to build up your credit score, maintain a healthy mix of secured and unsecured credits. This will convince your lender of your ability to handle all kinds of loans.
Also Read: How Credit Mix can Boost Credit Score
Check Your Credit Report for Errors
Credit information agencies decide a borrower's credit score and credit rating based on the information supplied to them by lenders. Sometimes, lenders pass wrong information which results in errors creeping into a borrower's credit report. Thus, borrowers must check their credit reports from time to time and if they see any errors, they must report them immediately. Rectifying these errors takes time. Therefore, one must report these errors immediately.
We often get questions, such as how to increase CIBIL score immediately. The truth is it is impossible to improve credit scores immediately. Building credit scores takes time. Even if you follow all the tips above, you will still have to wait a few months to see any concrete changes in your credit score. So, be patient. Do not expect to see changes overnight. Instead, be at it and keep practising rigorous financial discipline.
When it comes to availing of credit, a good credit score is a borrower's biggest asset. Therefore, borrowers must take concrete steps to ensure a high CIBIL score. If your CIBIL score is below 750, follow the tips mentioned in this article to ensure good financial health and an excellent credit score in the long run.
Improve Your Credit Score Immediately to Get Your Loan Approved _RAC_WC