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Mahesh Shukla , Getting a loan can be a difficult process for some people. Many people in the country face difficulties in getting loans at good interest rates as per their requirement. This is mainly because of not having a good credit score. Apart from this, many people do not have proper knowledge about financial matters, so they are not able to manage the situation properly. Credit history of any person or organization of the country is evaluated by Credit Information Bureau (India) Limited (CIBIL). It is a credit rating firm with more than 2400 members including financial institutions such as NBFCs, banks and housing finance companies. Credit history of over 550 million consumers and organizations is managed through CIBIL Score.
However, it is important to note here that CIBIL cannot tell whether a financial institution will approve a loan or a credit card to a person or not, but it plays an important role in building the first image of the borrower. Therefore, having a good CIBIL score increases the chances of getting a loan. If the loan is available despite having a low CIBIL score, there is every possibility that the person will be given a loan at higher interest rates.
Repairing a bad credit history can be difficult, but it is not impossible. Improving credit score takes time and effort. But by doing this, the person’s credit score can improve in the long run and he can get loans at lower interest rates. Here we have come up with some tips by which you can improve your credit score and increase your chances of loan approval.
how to improve credit score
Checking Credit Report: A person should always get a copy of his/her credit report from the credit bureau (Equifax, Experian or TransUnion) and check it for any errors. If so, then it can be fixed.
Timely Repayment: The best way to improve your CIBIL score is to repay your loan on time. In this way, your good image is created in the eyes of the lender and your chances of getting loan easily in future increases. In simple words, outstanding debt is the main reason for low CIBIL score. Therefore, one should manage the expenses from the credit card and take the loan according to his income and ability to repay on time.
Reduction in Credit Utilization: Credit utilization is the amount of loan availed against the credit limit. If credit utilization is kept less than 30 percent, then your credit score will be better.
Secured Credit Card: If someone is finding it difficult to get a credit card approved, then a secured credit card is a good option. With this, you can make deposits according to your credit limit, which improves credit score.
Balanced mix of credits: There should always be a balanced mix of credits. When the credit score falls, the credit card is often canceled, in which case apply for a new card. This has a negative effect on the credit score. According to experts, having a good mix of secured and unsecured credit helps in maintaining a good credit score.
(The author is Founder & CEO, Paymi. Views expressed are personal.)
Read also: Defaulted in loan? Don’t worry, credit score will be fine like this and banks will also give loan
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