Given the economic distress caused by the pandemic, it may not be surprising that one needs a personal loan to weather a currency crisis. But before you apply for a loan, check the credit score as this will affect the chances of getting the loan.
At this stage, we can have two questions: how check a credit score and how to improve it. For this, it is first important to understand what a credit score is. These factors are especially important in the post-pandemic phase, as a strong score will make it easier to obtain credit.
Credit score check
Whether it’s a personal loan, business loan, home loan, car loan, or anything else, lenders won’t extend credit without checking the score first. credit. Therefore, checking a credit score is the first hurdle.
But don’t worry, as new age fintech companies like Clix Capital and other lenders are helping with credit score checking for free. Plus, acting as a one-stop destination for all financial needs, Clix offers personalized recommendations for making better financial decisions.
For starters, a credit score is a three-digit number between 300 and 900 that reflects the ability to repay debt. This is calculated by keeping track of payment records and whether these are on time. The number of accounts maintained by the borrower also helps in the calculation of the credit score. Typically, a score of 750 or more is considered good.
Credit score is important to lenders because it allows them to assess the risk of lending money to borrowers. A high score indicates a lower risk of default and vice versa.
Once done, it is important to keep a regular track of the credit score. In the event that it drops below 700, it will be necessary to work on ensuring timely payments to improve the score. In India, four major credit bureaus track credit scores: TransUnion CIBIL, Experian, CRIF High Mark, and Equifax. Clix Capital has a link with Experian, through which credit score checks can be verified for free. These scores are based on financial information and records provided by banks and other financial institutions.
Credit score can also play a role in determining how much premium to pay when insuring a vehicle or home. Insurance agents create an “insurance score,” which is based on various factors, including credit score. A good credit rating can guarantee lower premiums, while a higher rating would result in additional annual premium costs. Likewise, a good score will allow access to the best credit cards at lower interest rates and higher rewards on transactions.
Whenever one has a low credit score, he should try to increase it as soon as possible by paying off all of his credit card dues. Since credit card interest rates are extremely high, it is best, if possible, to fully repay contributions each month to maintain or regain a high credit rating. If full payment is not possible, paying the maximum possible will always help improve the credit rating.
Ways to increase credit score
Another way to increase credit score is to consolidate all debts. For example, one can have multiple debts on different credit cards and with different lenders. Even if a single payment is inadvertently missed, it will upset the credit rating. To remedy this situation, we can opt for a Personal loan to pay off all those costly debts. Now, you will only have to track one EMI payment per month, which is relatively easier. In addition, personal loans can be used at a much lower interest rate than credit cards.
Additionally, credit cards should not be used to withdraw money. Although reward points are offered for withdrawing money through credit cards, there are several hidden charges. These include, but are not limited to, cash advance fees, financing fees and late payment fees. Ultimately, one could fall into the trap of high interest rate debt. This would then have a negative impact on the credit rating.
In an emergency, tapping into savings or borrowing from family or friends for short-term help is your best bet. One could also take out a short term instant personal loan from Clix Capital and repay through flexible EMI options. Needless to say, the interest rates will be more reasonable than those on credit cards.
Plus, take a long-term perspective and start saving money every month to create an emergency fund. To manage this, eliminate or reduce unnecessary expenses except the essentials.
Also, avoid using 100% of the credit card limit or going overdraft. It denotes an inability to manage money. Lenders watch overuse of credit.
One should also know about hard and flexible credit applications. Serious inquiries happen when lenders check credit scores before approving a loan. Multiple inquiries from credit reporting agencies can hurt your score as it seems like you are desperate for a loan. Conversely, an indirect investigation occurs when one checks one’s own credit score or if a lender makes a pre-approved loan or credit card offer. Naturally, soft requests have no impact on the score.
If there is no real need for a loan but it is just worth clicking on the lenders’ applications to check how much loan you can afford to borrow from them, please resist the desire. “Shopping” for loans and simultaneously applying to various lenders can lower your credit score. Therefore, even if you need a loan, finalize one or two lenders and then apply. Do not “over” apply to multiple lenders.
You should certainly not apply for a loan from several lenders at the same time. It is good to have a mix of secured and unsecured credit, which could also work in your favor when calculating the score. But too much of one category can upset that balance and hurt your credit rating.
Finally, it bears reiterating that timely payment of bills – credit card, loans, utility bills and the like – is mandatory for a strong credit score. Follow these guidelines to easily maintain a healthy credit rating.
Improving the office score and recovering from such sudden score drops is not difficult. There are only 2 things to pay attention to: repaying regularly and borrowing prudently. Another way to improve the score of the office is “prepayment” – if cash flow allows, try to repay loans early, that is, before the end of the loan term. This would not only save money on the potential interest that one would have to pay on the loan each month, but also improve the credit rating.