Take measures to improve Credit Scores to enjoy lower interest loans
A good credit score is the ticket to fast-track loans. Your credit score directly impacts your loan eligibility and helps you get lower interest rates on loans. You can leverage several simple tricks to improve your credit score before applying for a loan.
If you are in the market for a new car, house, or even a tech gizmo, you may probably consider getting a loan. After all, a loan empowers you to buy big-ticket items, while you can repay the principal sum in pocket-friendly and affordable Equated Monthly Instalments. At digibank, your good credit score can help you get fast track loans within minutes of approval. Wondering what a credit score is and how you can improve it? Read on to find out.
Credit Scores For digibank Loans
The credit score is a 3-digit numeric value, ranging from 300-900 points. It is a number that the lender considers before determining the status of your loan application. In India, entities like the Credit Information Bureau India Limited (CIBIL) and major banks pool together data about every consumer’s credit history to access your financial behaviour – the number of bank accounts you have, how you manage your payments and more. Upon crunching these variables, CIBIL assigns each account holder a credit score that reflects your credit repayment behaviour – whether you have repaid your previous and current loans and credit card bills on time. As lenders, it helps us assess your creditworthiness and determine the loan amounts you can get.
The higher the credit score, the better are your chances of getting a high-amount personal loan, home loan, etc. at lower interest rates. The credit score ranges from 300-900. While scores above 600 may make you eligible for a loan, those above 750 can help you get an attractive deal that is also budget-friendly. Ensuring you improve your credit scores before applying for a loan improves the chances of it being disbursed successfully.
How to Improve Credit Scores?
If your credit score is not yet up to the mark, worry not. There are some simple tricks you can employ to improve your credit score, and by extension, your loan eligibility. Here are some things you can do.
Mind your utilisation patterns and spending activities
Have you been making too many expensive purchases recently? What about your transactions – have they increased significantly? If yes, you need to keep an eye on them. Your bank might become concerned if your spending patterns begin to change suddenly. This may make them more cautious while extending new lines of credit to you.
Do not be swayed by tempting promotions
Are you tempted by an incredible promotional offer from a bank or lender? Some of them are great, but sending applications to many lenders can affect your credit rating! Banks consider the number of credit facilities available to you as liabilities and may view this behaviour as financially irresponsible if you respond positively to most offers. Focus on not over-extending yourself. This goes a long way in improving your credit score.
Show the lender that you are creditworthy
How often do you miss your credit card payments? If the answer is never, you have already won half the battle. Remember, banks deem you creditworthy for paying off your credit card bills on time. Try and make the total payments of outstanding credit card debt each month instead of partial or late payments. This not only saves you from paying interest on credit card spends but also improves credit scores.
Cultivate a good working relationship with the bank
Have you been a loyal customer since you did first open bank account online with your bank? Have you paid off your credit card bills in full and on time? Have you maintained the average balances needed in your account? If not, building a better relationship with your bank can be very rewarding. You would also then be considered a reliable customer and borrower.
Review the amount of credit you have
While you may have the ‘right card’ that helps you avail of discounts, cashback and other perks, you could consider scaling back on two things – the number of credit cards you own and the credit utilisation limit on each card. Your credit score is affected by the number of credit card accounts you have with various banks. If your credit utilisation ratio is over 30% on each card, your credit score could also be impacted. So try limiting your credit utilisation limit to 30% to improve your credit score.
Limit requests for new or hard credit
Applying for a new credit card or loans while repaying existing loans can adversely affect your credit scores for anywhere from 2 months to 2 years. The bank perceives this behaviour as taking on more debt than you can repay. So, avoid making constant, hard enquiries for fresh credit so that your credit score remains unaffected.
Pay off existing debts
An excellent trick to increase credit scores is to pay off your existing debts, including loans. If you pay your loan EMIs on time, without defaulting, you can rest assured that your credit scores will improve.
Frequently Asked Questions
What is the easiest and best way to improve your credit score?
If you repay your bills on time, your creditor proposes an increased credit limit. While you should accept the increased credit limits, avoid utilising more than 30% of the limit. This practice helps improve your credit score.
What is credit report?
When you apply for a loan from digibank, we ask you to provide some basic documents and proof of eligibility. Of these, the credit report is a document that affects the outcome of your loan, helps us determine the loan amount you can get and whether you are creditworthy.
Who assigns credit scores?
Credit scores are assigned by Credit Information Bureau India Limited, or CIBIL, Equifax and Experian in India. CIBIL is the leading credit information bureau in India.
How can I check CIBIL scores, and what are the charges for the same?
You can check CIBIL scores online on the CIBIL website. You can get your first CIBIL report for free. After that, you can opt for a one-time report by paying a nominal charge for the same. You also have the choice of selecting six month or year-long subscription models, the charges of which may vary.
How to build credit score?
The process of building credit scores is gradual. You can build your scores by regularly using your credit card and repaying your dues. Taking on loans and repaying them on time also helps build credit scores.
