Improving your credit score to get a better personal loan deal
Looking to take out a personal loan? Your credit score is important in determining the interest rate and other terms you’ll receive from lenders like IDFC FIRST Bank or other lenders. The higher your credit score, the good deal you can get on a personal loan. Here’s how to improve your credit score to get approved for a personal loan with the best terms.
Check Your Credit Report
First, check your credit report from agencies like Experian, Equifax, and TransUnion, especially if you plan to apply for a personal loan online. Review the report carefully and ensure all the information listed is accurate with no errors. If you find any discrepancies, get them corrected by disputing them with the credit bureau. This will help your credit score and enhance your eligibility for a personal loan online.
You can order a free copy of your credit report from each major bureau every four months. This way, you can monitor your credit report and score year-round. Stay on top of any changes or errors that may impact your score.
Pay Down Existing Debts
Lenders like to see that you’re able to manage debts responsibly. Make an effort to pay down your existing debts like credit cards, loans, and mortgages. Try to have your credit utilization ratio less than 30%.
This measures how much of your total available credit you’re using. The lower the ratio, the better.Set up an automatic transaction method to avoid missing any monthly payments. Delinquent payments lead to late fees and negatively impact your credit score.
Avoid New Credit Applications
Every credit application leads to a hard inquiry on your credit report. This causes a slight dip in your credit score. Avoid applying for too many new loans or credit cards, especially before taking a personal loan. Let some time pass between applications.
Before applying for new credit, check if you can get approved for a credit limit increase on your existing accounts. This gives you more available credit without another hard inquiry.
Maintain Low Credit Utilisation
As mentioned, having a low credit utilization ratio across all your existing credit accounts also boosts your score. Keep it below 30% by limiting your spending and making timely payments.
Track your credit utilization monthly and focus on keeping the ratio low across all accounts, not just on one card or loan. Proactively ask for a higher limit if needed.
Have a Mix of Credit Types
Lenders like to see you’ve successfully managed different types of credit accounts like credit cards, auto loans, mortgages, etc. A healthy mix on your credit report indicates you’re an all-around responsible borrower.
If you only have credit cards now, consider taking an instalment loan, like a personal loan, for a relatively small amount. Manage it well to build your credit mix.
Correct Any Errors
Even a small error on your credit report can negatively impact your score. Thoroughly review all accounts and personal details listed on your report. Dispute any inaccuracies you find with the relevant credit bureau.
Stay persistent until the error is corrected by providing the necessary documentation. This can significantly improve your credit score.
Final Words
By taking these steps, you can enhance your credit score substantially over a few months. Once you score over 750, you become eligible for the best personal loan interest rates from IDFC FIRST Bank and leading providers. This will save you thousands over the lifetime of the loan.