Improving the Credit Score is on every individual’s mind. And, it should be. Credit Score is the measure of your Creditworthiness. Creditworthiness is the measure of an individual’s ability to repay the credit/loan to the lender on time. High creditworthiness means that the lender will be confident in you, and will trust you with timely repayment of the loan.
But as a New to Credit (NTC) or with Low Credit Score, what can be your option to build Creditworthiness? Personal Loans can help solve your problems. An instant personal loan will not only help you in the times of need but will also help you to build an excellent Credit Score.
What is a Small Personal Loan?
An Instant Personal Loan typically means a small Loan that ranges from as low as 7,000 rupees to up to 50,000 rupees. Such loans require no collateral from the borrower, and are typically disbursed into the bank account in only a few minutes! Personal loans help individuals in building a credit track record and trust for creditworthiness.
Here is how a Personal Loan can improve your Credit Score.
It Helps You Build a Credit Score from the Start
Individuals with a low income find it difficult to build a credit score. Since they don’t have one, they do not get a loan easily. And, if they cannot get a loan, they cannot have a credit score! This dire loop can be broken by availing a personal loan of a small amount. Since such small personal loans do not require collateral or a high credit score, they can be easily availed, and help you build your Credit Score from the start.
Repayment of High-Interest Loans like Credit Cards
Nothing will affect your Credit Score more badly if you have long outstanding Credit Card payments. Credit Cards come with much higher rates of interest than Personal loans. If you have multiple outstanding credit card bill payments, then it is better to avail a personal loan and clear the due credit card bills. You will not only increase your Credit Score but will also save money from higher credit card interest.
You can even take a personal loan to clear monthly recurring EMIs on High-interest loans in case they are due. It is always better to repay the due EMIs with a lower interest loan to escape loan default and save your Credit Score.
Few Points to Keep in Mind While Availing a Personal Loan
• Decide the Loan Amount Carefully. Applying for an amount much higher than you need & can repay will make repayments difficult for you. If you want to build a strong Credit Score, then apply for an amount that you are confident to repay on time.
• Do not apply for Multiple Loans at Once. Frankly, it is not a ‘hit-and-trial’ game! If one or two lenders reject your request for a personal loan, that means you are not eligible for a loan yet. Multiple loan applications will label you as ‘Credit Hungry’ and bring down your Credit Score.
• Make Timely Repayments. This goes without saying that you must repay your loan EMIs timely every month. Missing a payment or two will affect your Credit Score negatively. Also, if your intention is to build a good credit score, then you must not ‘Prepay’ the loan amount. Longer Credit history with On-time payments will boost your credit score up within a few months.
Now you know the golden rules to avail a small personal loan and improve your credit score with it. Apply securely for a personal loan today!