Your credit score plays a crucial role in determining your creditworthiness. Lenders look at this number to see how responsible you have been towards making your repayments and whether offering you a loan is safe or not. Most lenders ask for a minimum credit score of 725 or above to accept your loan application. You may check your credit score and see if it meets the lender’s requirements. If it is less than 725, it may take some effort and time to improve it.
For your help, we have put together these top 5 tips and expert advice to improve your credit score like a pro.
1. Consider Your Limits While Borrowing
The first and most critical step towards borrowing sensibly is to know your repayment capacity. If you are borrowing for the first time, start small so that you can efficiently manage your EMIs. Evaluate your wants and needs and borrow accordingly. Although Clix Capital offers personal loans of up to ₹ 25 lakhs, and you may be eligible for it but, it does not mean that you must take the entire loan amount available. Ensure that you are borrowing as per your requirements and within your budgetary limits. As a practice ensure that your total EMIs for all credit instruments (personal loan, home loan, auto loan and credit card payments) do not take more than 30-40% of your monthly income. If you have a credit score lower than 725, take a step back and clear your past dues before borrowing more.
2. Be Regular with Your Repayments
A smart borrower stays consistent with his/her repayments. But do you know the benefits of paying your EMIs on time? Your lender records your payments and reports them to the credit bureaus. These organizations make your credit report and calculate your credit score according to your credit behavior in the past. Missing your loan EMIs and credit card bills leaves negative remarks on your credit report and damages your credit score. The more used to you are of missing your payments, the lower your credit score will be resulting fewer chances of getting loan approval.
Activate e-mandate and opt for automatic payments from your account to avoid missing any EMI repayments.
3. Keep Tabs on Your Credit Report
Even a minor error in your credit report may hold back your credit score, unnecessarily preventing you from availing a loan you require. Request your credit report from a credit bureau and screen it thoroughly to identify any errors. These errors can be anything ranging from identity errors to incorrect entries.
If you pinpoint any errors in your credit report, let the credit bureau know about it and have it fixed. Once your report is error-free, you may see your credit score increase.
4. Do Not Apply for Multiple Loans Simultaneously
While you have a bad credit score, there are chances that you are in real need for credit to pay your current loans and improve your credit history. To avoid chances of loan rejection, you may consider applying for several loans at a time, thinking that you will get approval from at least a few of them. But that’s one step you want to avoid at all costs.
Each loan application marks a hard enquiry in your credit report, which reduces your credit score. Compare the lenders based on the eligibility criteria, amount offered, interest rates, eligibility conditions, and customer service, and apply to one that you find most suitable for your profile and requirements.
5. Keep Your Credit Utilization Ratio Low
A low credit utilization ratio indicates that you are not relying on available credit for daily expenses. If your credit card providers offer you a credit limit increase, accept it readily but avoid exhausting it. It is advisable to not use more than 50% of your credit limit, as it will keep your credit utilization ratio low that will ultimately lead to an improved credit score.
Another way to reduce your credit utilization ratio is to apply for new credit and maintain your old accounts even if you no longer use them. By doing this, you still have their credit limit even if you are not using it.
Improving your credit score and maintaining it using the tips above open up new opportunities for credit. With a credit score of above 725, you can get loans at low interest rates with convenient repayment options. Clix Capital offers personal loans, home loans, and small business loans to borrowers with a credit score of at least 725 or above. Use these tips to improve your credit score gradually and apply for the required loan with us!
You can also reach out to us at firstname.lastname@example.org or call us at 1800 200 9898