During a financial crunch, reaching out to funds or availing a loan has become more stress-free, quick and easy. Thanks to the instant availability of personal loans from various banks and NBFCs that have proved to be a light of hope for many during an emergency. Other than banks, more convenient and user-friendly NBFCs have made their name and fame with easy loan approval procedures, minimal paperwork and reasonable interest rates.
However, obtaining a quick unsecured loan depends on a few vital aspects such as eligibility criteria, credit score and a good standing. As an unsecured personal loan does not involve any collateral or security, it becomes necessary for the lenders to check whether or not you fulfil the eligibility criteria and that’s the reason a borrower should adopt and maintain good financial habits. So, if you require a loan, beware of these 5 habits that can reduce your credit score and your loan eligibility as well.
1. Irregular and late repayment of credit card bills and loan EMIs
A disciplined borrower who has a healthy approach to the repayment of credit card bills and EMIs is pleasing to the lender. Irregular and late repayment of credit card bills and loan EMIs showcases a negative and careless attitude that makes your credit card score drop. Even credit firms give importance to credit repayment reports and history while calculating a credit score. Give this a thought that how many credit cards and loan EMIs are you operating? It’s not surprising to miss any one of the payments. All this makes it essential to clear outstanding payments timely and in full. Remember that loophole in clearing your debt repayment reflects in your credit report and can hinder future loan eligibility and approval chances.
2. Unlimited credit utilization
Here, all you need to know is a little bit of calculation. This refers to the part of the total credit card limit used by you. So, you have to limit your credit card usage to 25-30%. For example, if your credit limit is 1 Lakh and your credit card usage amounts to Rs. 30,000, then your credit card usage would result in 30%. The bottom line is, any credit card utilization of over 30% is considered as credit hungriness. Your credit card report or history might diminish your credit score by just a few numbers. You could either request a credit limit that will maintain your credit utilization ratio.
3. Not checking your credit report often
Remember, your credit history or report sums up your repayment status, which also includes previous loans, current loans and credit card account details. Any lender will check your credit score before approving your loan. Your credit report might contain any error or unethical activity of which you might be unaware. It is wise to keep a check on your credit report at regular intervals. Developing such a timely habit will enable you to rectify your report errors and maintain a perfect credit history for future benefits.
4. Applying for multiple credit Lines
As said – too many cooks spoil the food. Same way, opening up a new credit line expands your credit limit, but submitting newer applications for a fresh credit option builds a hard enquiry on your credit report. A hard enquiry is a comprehensive analysis of your credit history or profiles to examine where you stand as a borrower or how much risk you deliver on loans and repayments.
5. Not consolidating your debts
Having too many debts gives a negative impression to the lender that might get your loan application rejected or delay it beyond your expected time. Well, if that is the case, you can use this to your benefit. You can opt for a debt consolidation loan from your bank and use this amount to pay off your loans or debts. Debt consolidation means merging all your debts or loans into one payment. Once your interest rate lowers, you can easily pay your debt faster.
These are the 5 unpleasant habits you need to avoid hurting your credit score. Once you recognize them, try to improve and avoid them as soon as possible and see the progress of your credit score.
Check your online credit score and see where you need to improve. If your score goes above 630, you can apply for a personal loan, business loan, or home loan from Clix Capital and cover your expenditures in time.
If you are under any of these 5 habits, it’s not too late for building and maintaining a credit score. However, these steps will not bring immediate change or improvement to your credit score, it might take 4-6 months or even a year to outshine your credit score.
Clix Capital is a reputed NBFC that deals in a wide range of loan products, including personal loans ,business loans, etc. If you are thinking of applying for any of these loan products, you must have a credit score of at least 630 or above to qualify easily. Get an online credit score check and see where you stand. If you are looking forward to refining your credit score and handling your finances better, set these financial habits and see yourself with better chances of availing a personal loan easily.