In India, numerous individual applies for several kinds of loan. But, in these countless applications, many are approved and others are rejected. Do you know, why several loan application gets declined? There are innumerable factors which are crucial in your loan approval. One of the extensive factors is an individual’s Credit score. Let me brief you, what is Credit Score? It is a score that is generated by credit bureaus on the basis of the financial track of an individual.
In India, there are 4 credit bureaus and CIBIL (Credit Information Bureau Limited) is the oldest and with the highest coverage. The minimum score is 300 and the highest is 900. Your credit score defines the creditworthiness for a future loan. CBIL score plays a profound role in your loan approval.
If your CBIL score is equal or more than 750 then the possibility of the loan approval is excellent. Similarly, if you have a lower credit score, expectations are high that your loan might get rejected or it might make the loan more expensive for you with a higher rate of interest. But with the assistance of credit rectify, you can improve this score or even rectify it.
These are the 6 reasons to improve your credit score:
1) Consistent with EMIs and Credit card payments– This is one of the significant factors in ameliorating your credit score. The repayment history of an individual defines your credit score. Thus, consistent payments of installments will boost your score immensely. So make sure that in future you will pay your EMIs or credit card payments within the due date.
2) Check credit reports for any mistakes– In the credit report, any of the error should not be neglected. The most first thing you should do is make a proper order of your credit report. Analyze for errors, if any lender has by mistakenly submitted about your loan. Sometimes, even after paying consistently the lender is showing a skipped EMI. In this case, you might require the assistance of your lender and CIBIL to get it corrected.
3) Prepay Personal Loans or outstanding credit card balance– In scenarios, where you have personal loans or an outstanding credit card balance, closing them might be very fruitful to you, as they come under the segment of unsecured loans and are expensive too.
4) Limit inquiries for Loans/Credit Card– Numerous application for loans and credit card can be harmful to your credit score. It can have a negative impact on your credit score. In the future, don’t apply for every loan/credit card.
5) Do not cancel your Credit Cards – People might counsel you to decline your credit cards with the thought process to improve your score. But in reality this is not true – it’s beneficial to have a credit card in your wallet as it adds up to the total limit of your credit and your spending has low utilization ratio- this shows that you are financially stable. But, if you already have more than 3 credit cards this is not beneficial.
6) Keep your credit card utilization low – An individual should try to avoid crossing the credit limit on the credit card and keep the utilization low. if you don’t have control over your spending, you can increase the credit limit. One more way is to keep paying as you spend, as this will lower the utilization.