Do you wish to avail a personal loan yourself? Then a good credit score can help you get one quickly. A credit score of 750 or above is required to help you avail of a personal loan at lower interest rates. There are several ways to improve your credit score.
How to Improve Your Personal Loan Credit Score?
A personal loan is a perfect solution to meet urgent financial needs as it does not need any collateral and readily available with minimal formalities. Though many people find it expensive to borrow, if managed smartly, a personal loan can be a great option to rescue you in your bad time and contribute to improving your credit score. A good credit score is required to take a personal loan, but your credit score is not the only thing that lenders consider to discover your eligibility. However, some lenders do offer unsecured loans to people with decent scores if their other criteria are impressive.
Factors to Measure Credit Score
The five factors based on which your credit score is measured out of 900 are:
Length of the credit period
Total debt owed
Type of loans taken
What Factors Can Improve Your Credit Score?
Clear your Previous Dues
It is essential to clear your old debts to get easy personal loans. Clearing your previous dues before starting a new loan with new terms is a healthy way to maintain your loan payment history, which further improves your credit score.
Make Repayments on Time
After receiving a loan, you need to repay them as per your convenience in installments but following the conditions of the lenders. Since there is no burden, you can comfortably pay your installments on time. Makin repayments of loan on time is an excellent addition to your credit history to improve your credit score.
What to Consider While Applying for a Personal Loan to Improve Credit Score?
Say No to Multiple Loans
You should not look like a credit hungry person in front of financial institutions and lenders. Hard enquiries are made on your credit report each time you apply for a loan, affecting your credit score. Too many hard enquiries are seen as a positive sign for a borrower.
Be Careful About the Loan Amount
Take a personal loan for the amount you have need. If you are taking a loan to improve your credit score, the loan amount becomes an essential factor. Make a proper assessment of your requirement and then apply for the loan.
Regular Payments is Important
If you are taking a personal loan for credit repairment, and fail to pay your EMIs on time, then your effort to improve your credit score will not make any sense. Both credit cards and personal loans are unsecured and affect your credit score the most. So ensure you are regular in paying your EMIs without any delay.
Avoid Pre-paying your Loan
You should not pay your loan before the loan maturity date if your purpose of taking a loan is credit building. The longer your credit history, is better. So for a better credit score, you must keep making regular payments for a more extended period.
Do Not Go for Other Debts
Your credit score starts improving as soon as you start paying your monthly installments, and you will also become eligible for various types of loans. The offers may be attractive, but they can impact your credit score negatively.
Say No to Premature Closure
Your lender considers both short and long-term creditworthiness. Even if you have the money to close your dues prematurely, make sure you pay a bulk amount and do not close it before your loan tenure ends.
People take personal loans not only for financial emergencies but also to building a good credit score rating. Consider consolidating your debts or avail a personal loan for an amount that you repay comfortably.