While it is beneficial to maintain a high credit score, many people struggle to do so. If your credit score is about 700 or more, you can easily avail of a personal loan, and you may even get an attractive offer from the lender with discounted interest rate. However, if your credit score is low or does not meet the lender’s minimum requirement, chances are high that you won’t get your loan approved.
However, all is not lost for you. You can easily build your credit and increase your eligibility for a personal loan. In this blog, we discuss a few simple and smart tips.
Pay the dues on time
If you are nursing any loan or have outstanding payments like credit card bills and missed a few EMIs, it is time to get organised. Make sure to set reminders for your EMI payments and automate your credit card bill payments. With every EMI you pay, your credit score gradually increases, and you may soon be eligible again for a personal loan.
Use credit cards prudently
Whether you have one or multiple credit cards, use them wisely. Avoid taking too much credit at once. Also, ensure that you keep your credit utilisation ratio below 50-60%. This will reflect your responsible credit behaviour. If you have an outstanding amount, first repay that before taking another debt. As you repay the dues, your credit score will improve and increase your eligibility for a personal loan.
Maintain a good credit mix
It is better to have a combination of secured and unsecured loans like credit cards, personal loans, home loans, vehicle loans, etc. If you have too many unsecured loans, the lenders will be sceptical of your credit behaviour and reject your personal loan application. Also, even if you miss or delay the EMI payments, your credit score will drop significantly.
Review your credit report frequently
There are many credit bureaus in India, like CIBIL, that maintain your credit report and keep track of all your credit transactions. You must obtain your credit report from such agencies and check for inconsistencies.
Credit bureau agencies may sometimes make mistakes in updating your records and record incorrect details in their system, which can affect your credit score. Sometimes the dues you have already paid off may appear unpaid in your report due to the agency’s mistake.
If you notice such errors or inconsistencies in your report, immediately report it to the concerned credit bureau and get it rectified. Once the errors are corrected, your credit score may go up, and you will be eligible for the personal loan you desire.
Monitor your co-signed and joint accounts
If you have taken any joint loan or signed as a guarantor for someone, and if they have missed their payments, it may have serious repercussions on your credit profile and score. So, if you plan to apply for a personal loan, it is better to avoid signing as a co-applicant or guarantor. This will help you avoid the risk of lowering your credit score and eligibility for the loan.
Final Word
Now that you are aware of the various tips to build your credit score, do your due diligence and get your approval for your personal loan application without any hassles.