Sunday, December 10, 2023

The Ultimate Guide to Maintaining an Excellent Personal Credit Score

The Ultimate Guide to Maintaining an Excellent Personal Credit Score

Tired of getting your loan, credit card, and mortgage applications rejected because of your poor credit score? Do not worry! Although maintaining a high personal credit score is not difficult, it does need some effort. A high credit score is crucial for anyone seeking a Online Personal Loan or other credit. Lenders primarily consider your score when deciding whether or not to approve your loan application! They use these scores to evaluate borrowers’ creditworthiness and set interest rates. In the long run, maintaining a high credit score is beneficial to practise stability and discipline! This comprehensive guide will give you the lowdown on maintaining your high credit score and your lender’s satisfaction as well!

Understand what a Personal Credit Score is:

Lenders use your credit score, a three-digit figure, to determine how creditworthy you are. The CIBIL score, which goes from 300 to 900, is the credit score most frequently used in India. Some lenders may use other credit scoring systems like Experian. A score above 750 is typically regarded as excellent, whereas one below 600 is typically seen as poor. It is calculated by using your credit history, credit use ratio, types of credit, and payment history. Therefore, it is crucial to know how your credit score is determined and what elements go into it.

Keep Your Credit Utilisation Ratio Low:

This credit ratio measures how much of your available credit you are using. A high credit utilisation percentage might still harm your credit score even if you always make timely payments. Therefore, keep your credit utilisation percentage below 30% as a general guideline. For example – you should not use more credit than Rs 15,000 of your Rs 50,000 credit limit.

Check Your Credit Report Regularly:

Regularly examining your credit report is key to maintaining a high personal credit score. In addition, it’s crucial to look at your credit report for correctness because mistakes can negatively influence your score. A free credit report from CIBIL is available to you once a year, and it’s a good idea to evaluate it! 

Avoid Applying for Credit Frequently:

Every time you ask for credit, a hard inquiry is recorded in your credit history, which might lower your credit score. Even if you have a strong credit history, applying for credit regularly gives lenders the impression that you are a risky borrower. To avoid applying for too many loans or credit cards at once, only apply for credit when you need it.

Don’t Close Old Credit Accounts:

Closing old accounts seems like a smart idea to simplify your finances, but doing so can lower your credit score. Around 15% of your credit score is affected by the duration of your credit history. Cancelling an old account can lower the median age of your credit accounts, which will lower your score. There may be other advantages to maintaining older credit accounts. It does not matter if you don’t use your account often. A credit card with a long history of on-time payments can show lenders that your credit history is excellent. This can help you when seeking new credit as it demonstrates your responsibility as a borrower.

Keeping old credit accounts active doesn’t mean using them excessively. Making random transactions with a credit card you don’t use frequently is a smart move to keep it active. The remaining balance can then be paid in full to avoid paying interest.

Negotiate with Your Lenders:

Many lenders know that unexpected things can happen and may impact your ability to repay your loan. In such circumstances, they could be open to talking with you to develop a solution that benefits both. A payment plan is one option lenders can provide. You will repay your debt in instalments over a predetermined time frame. Since the payments are usually smaller than your regular payment, they are easier on your wallet. In addition, using this option can prevent missed or late payments, which might harm your credit score.

Be open and honest with your lenders while negotiating a loan. Explain your financial struggles and suggest a payment arrangement you can afford. You can negotiate with your lender to extend your tenure to help you pay off your debt efficiently.

What to Do if You Have a Low CIBIL Score for a Personal Loan?

Getting a Personal Loan may be difficult if your online CIBIL score is poor. If you have a low score, lenders will be reluctant to lend you a loan. It suggests that you could be a high-risk borrower. There is yet some hope, though. You can take several actions to raise your credit score and increase the chance of getting a Personal Loan authorised.

  • Understand why your score is low by checking your credit report for errors.
  • Improve your score by paying dues on time, paying outstanding debts, and keeping your credit utilisation ratio low.
  • Consider a secured loan backed by collateral, such as property. You can do that if you’re struggling to obtain an unsecured loan.
  • Look for alternative lenders, such as peer-to-peer lending platforms. They may be more willing to work with you despite your low score.
  • Get a co-applicant with a good credit score to reassure lenders that the loan will be repaid.

These steps increase your chances of getting the loan you need, despite having a low CIBIL score!

In conclusion, maintaining a great personal credit score is relatively easy. Keep your credit score high and be eligible for credit when needed by following the advice provided in this guide. Remember that following just a few little steps can have a big impact. These steps include checking your credit report frequently and maintaining a low credit utilisation ratio. If you have a low CIBIL score for a Personal Loan application, don’t become alarmed. With perseverance and work, you can still raise your score and become eligible for a Personal Loan. You may create a more secure and planned financial future by actively controlling your credit score. So, why not take the first step today?


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