If you are willing to take a personal loan, then your credibility will be judged on your credit score, or they call it CIBIL score here in India. Your worthiness will be decided on the credit score you have maintained until the date you are applying for the loan. Actually, with your credit score, the lender will get to know how good you are at repaying your loan. If you are interested in availing any of these future loans and fast loan shortly, then you need to know how a credit score can be maintained, how it works, and ultimately how this score will affect your ability to take a loan. Therefore, it is advisable to carry a check my credit score on a regular basis.
What is a credit score?
Your credit score is a representation of your creditworthiness in numerical form. It is the score that says how good you are repaying your debt. It is a factor which aid banks and other lenders in calculating the potential risk of their customer applying for a loan.
In India, we have a company called CIBIL, which determines your credit score as they have access to all your credit history (loan repaying history) and all your credit information. Analyzing all your credit data, they calculate your score. This score typically a three-digit number and ranges from 300 to 900. These scores are not only calculated for individuals but also for business known as a business credit score.
How can you calculate your credit score?
It is calculated after taking into account several factors, some of the most important they are:
Repayment History: How regularly and swiftly, you repaid your loan. It constitutes about 35% of your overall credit score.
Credit Balance: Credit balance is that part of your sanctioned credit that is unutilized. Your risk of default is more significant if your credit utilization is higher. It constitutes about 30% of your credit score.
How long you availed credit: punctuality in repaying your loan and you’re and how long you availed the credit. This duration constitutes 15% of your credit score. New loans or credits: So frequent inquiries for new credit cards and loans may end you up in difficulty as it reflects on your credit score. It tells them that you always tend to keep colossal debit or credit. It can constitute a maximum of up to 15% of your credit score.
Credit Mix: It can influence your credit score by up to 10%. It is a mix of unsecured and secured loans and short-term or long-term investments.
How will you know your score is an ideal credit score?
Generally, credit score ranges from 300 to 900, but the ideal score ranges from 750 to 900. If your score is above 750, then it will be straightforward for you to get a small personal credits and fast loans. It will also make you eligible for taking any unsecured loan quickly.
How does your credit score impact your ability for small Personal Loans?
Your credit score impacts your eligibility for personal loans in two ways.
Overall eligibility: It determines your eligibility for loans as first-time borrowers and borrowers with a high credit score are always welcomed by the lender for unsecured high personal loans rate of interest: It also plays a vital role in determining the interest rate you are to be charged by the lenders. They always prefer to offer loans at low interest to people with a high credit score. They do so as they have a sense of security on the repayment of the loan, and they know that they will get a significant sum as early as possible on the borrower front.
How to improve the credit score?
Some precautions to be taken to improve the credit score.
- You should always pay your EMIs on time
- Not forget to cancel your dormant credit cards
- Refrain from applying for too many loans very frequently
- Always prefer for pre-payments of your credits
- Never take long term credits unnecessarily
- Review your Credit History. It is really very important to undertaker a regular check on your score. Maintaining a follow -up can help to improve the score.
- Distributing your funds is useful. Don’t park your all your funds in one bucket. Having a combination of secured and unsecured loans is a feasible option.
- Make sure all the old loans are closed before starting a new investment. After completing the transactions, status of closed should be shown in the report.
As the points discussed above, you are advised to maintain a high credit score as you never know when you end up in an emergency and in need of some considerable finance. For a situation like this, a very dependable solution is fast personal loans. They give you the freedom to manage any low situation in your own economy. For being very eligible for a personal loan, you need to maintain a high credit score.
Personal Loans are unsecured form of loans. Personal Loans are hassle-free as investors are not required to pledge any collateral or keep any security incase of availing a loan. But, Bank will hold specific criteria to ensure the safety and credibility of the concerned. Among the range of checklist, the cibil score plays a most crucial role. As discussed above, having a good credit score plays a predominant role in terms of any investment. 700 is the minimum, and below, it is considered to be a poor score. In case of a low score, bans can put up other conditions from tof you like keeping security or getting a co-applicant. Therefore, to ensure a hassle-free investment journey, investing in a fixed deposit is considered to be the best option.
Even after you avail of a Personal Loan, following all the above parameters is crucial. Having an excellent financial base and proper follow up of all things is a useful tip to follow, having good records in the credit report can, in turn, help in further investments in the future.