6 Tips to Improve Your Bad Credit Score-Free Credit Score Check Helpful?

Improve your bad credit score with these tips

 

‘Bad Credit Score’ – The 3 words that sound like a death knell when applying for a personal loan or a new credit card. Many of us forget that the credit score is a crucial eligibility criterion when applying for a personal loan from a bank or a digital lending platform, such as Loan Singh.

The information pertaining to your credit score – for all eligible borrowers – are provided on request, by Credit Information Companies (CICs) to financial institutions in the form of a report. This report is called ‘Credit Information Report’ and commonly known as – ‘Credit Report’. Your creditworthiness and credit history is assessed by financial institutions through your credit report. An astute salaried individual is someone who embraces the financial mistakes of the past and then acts on it to correct them.

 

Meaning of Credit score

The credit score is a numeric three-digit summary of your credit history. This score is derived from your credit report. The credit score ranges between 300 and 900. The higher your credit score, the less risky is your profile when applying for fresh credit. A higher score also improves your chances of getting your personal loan application approved.

Now, the credit score is calculated by CICs or credit bureaus through their proprietary logic. Not entirely, but some factors that can have a bearing on your credit score turning bad are a type of credit facilities that you availed, duration of credit, outstanding debt (if any), payment defaults and repayment history.

Learn how to apply for an online personal loan

Credit Bureaus in India

There are 4 licensed credit information bureaus namely CIBIL, Experian, Equifax, and Highmark. Out of these, CIBIL is the most accessed credit bureau. As the name suggests, a credit bureau houses your credit information. It maintains the information sourced from credit institutions, credit card companies, debt collection agencies and the government.

Credit bureaus look at your credit repayment patterns to determine how much of a risk you pose to the credit lending institution. Whenever you go to a credit institution for fresh credit, a hard inquiry is raised by the institution to the credit bureau. The inquiry is basically a request to fetch your credit repayment history. The bureau then sends the history back to the institution in the form of a credit bureau report; with a compiled numerical score called credit score.

A credit score is a reflection of your monthly payments of loan EMI and credit card bills. It also considers the above mentioned hard inquiries. The score is accompanied with your personal information such as name, date of birth, residential address, corporate address, PAN, Voter ID, contact details along with figures for the loan amount, credit card limit, outstanding current balance, etc. Credit institutions consider your credit score while taking a decision on your loan application. A poor score means you are a potential risk. Because it gives an overall picture of your credit responsibilities in the past, it is a trusted system followed by credit institutions.’

 

Improve your bad credit score with these tips

 

Different ranges of CIBIL

CIBIL has a minimum value of 300 and a maximum value of 900. The higher your credit bureau score, the better are your chances of getting credit from credit institutions like banks, digital lending platforms and credit card issuing companies.

Score less than 0

A credit score of 0, or less, means that you have no credit history. It is wise to apply for a personal loan from a digital lending platform (such as Loan Singh) because banks are likely to reject your loan application.

Score between 350-500

A score between 350 and 500 is poor, indicating either a default in past EMI payments or excess credit utilization on credit cards.

Score between 550-650

A score in this range is acceptable; it indicates that you have been regular with your payments and can be trusted for fresh credit. The chances of getting a loan approved are good.

Score between 650-750

This range indicates that you are doing well with your finances. You should stick to your financial habits to maintain or improve your score. The chances of getting a loan approved are great.

Score between 750-900

This is considered the best range for a borrower. This clearly indicates that you have been regular with your EMI or credit card bill payments. You can avail a loan with ease.

 

Credit Score Working

When you apply for a personal loan at a bank, or at Loan Singh, your credit report is checked, and your credit score determines your eligibility for the loan. Your credit score is your first impression of the credit institution. The higher the score, the better are your chances for availing credit. A bad credit score can put your profile inside a risk zone and make it difficult for approval.

The details of your credit application is lodged within your credit report The report includes names of credit institutions you applied at, types of credit facilities such as, personal loans, mortgages, auto loans, overdraft, etc.; your account information, credit availed dates, ownership information, payment history, amount balances, loan amounts and repayment records (up to 3 years). Your credit limit, loan availed against or above credit card limit, demographic details and current balance are also documented as per credit bureau report.

Another good read is to know the difference between credit card loan and a personal loan

Free Credit Score Check

Now, there are many resources online that promise a free credit score check. But, it is recommended you approach the credit bureau directly to get a copy of your credit report. This is because, in case of any discrepancies, you can get it sorted directly with the bureau.

Credit score plays a crucial role in your financial freedom. Being responsible for the use of credit, timely repayments of EMI and balancing the number of loans and credit cards will ensure a good credit score. This will also prevent any financial hiccups along the way.

You will also like to know what happens when there is a personal loan default?

Tips to Improve Your Credit Score

Once you have a copy of your credit report, take preventive steps to not let the score to drop further. Only then work on it to improve your credit score. Let’s take a look at 6 tips to improve your credit score for instant approvals and easy online personal loans.

Late repayments

This is easily the most important reason for a poor credit score. You must ensure that you repay your EMIs and bill statements on time – each month. If you don’t know which sudden expenses could come-up the next time, have some emergency funds in place. Set up an auto-debit facility that allows your EMIs to be debited directly from your account by the credit institution.

Maxing out your card limit

Keep your credit card spend at a low. Aim at spending only up to 40% of your limit. Don’t try to apply for a 2nd credit card if you are struggling with the first card itself. This will lead to a double jeopardy of rejection along with a hit to your credit score.

A healthy mix of credit

You must ensure that you have a good mix of credit, i.e. a mix of personal loan, secured loan and credit cards. This tells the credit institution about your experience of servicing debt. In case you have no credit history, yours truly (read Loan Singh) will still approve your personal loan request.

Closing multiple cards at once

In case you own multiple credit cards and are planning to close one or two immediately, do so at periodic intervals. Closing a credit card means closing that card’s repayment history, which will anyway reduce your credit score. Also, remember to close the newest cards first.

Avoid credit frenzy

Do not apply for fresh credit, at multiple institutions, within a short span of time. Too many inquiries, in a short span of time, will indicate desperation for credit and will affect your credit bureau score.

Check for errors

Apply for your credit report just before you want to apply for fresh credit. This way you will know which errors are present in your report, and you will have a chance to rectify it. Dispute the errors, and apply for a new report to see if the changes are updated by the bureau, or not.

Read more about the best personal loan website in India

Loan Singh is a digital lending platform that prides in providing online unsecured personal loans to salaried individuals. You can apply for quick funds as an easy emergency loan which is not a bank loan, but provide a loan with best personal loan interest rates. The instant funds, or instant loans, are small loans taken for purposes such as home improvement, house repair, marriage/wedding, medical, second-hand car, second-hand bike, vacation, and travel. You can calculate your easy EMIs using our personal loan EMI calculator. We accept bank statement, PAN and Aadhaar for quick loan approval. A bad credit score or credit report errors can lead to personal loan rejection. The ‘Loan Singh Blog’ is one of the best finance blogs in India.

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