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HOW TO BOOST YOUR CREDIT SCORE THROUGH PERSONAL LOAN?
Personal loans are a great option for financial emergencies because they do not require collateral and have simple formalities. But did you know that you can help you improve your credit score via personal loan? You would have heard that having a good credit score is also required in order to obtain a personal loan in the first place. Yes, that's right! However, you should take into account that your credit score for a loan is not the only factor considered by lenders when determining your credibility. Some lenders might provide a personal loan with a low CIBIL score. Then there are a few lenders willing to make unsecured loans to people with 'fair' credit scores if they meet other requirements.
Benefits of Taking Personal Loans to Improve Credit Score
Here are some of the benefits of taking personal loans to improve your credit score:
Pay off your old debts.
Taking a personal loan is the simplest way to pay off your old debts. At the same time, it also helps in improving your payment history which, in turn, improves your credit score.
When you apply for a loan, you pay that back in installments determined by the lending institution based on your ability to repay. Because there is no burden, you can simply pay the installments on time which will contribute to your credit history and enhance your credit score.
Things to Consider While Applying for Personal Loans to Improve Credit Score
Here are some of the things that you should consider when you apply for personal loans to improve your credit score:
Do not apply for more than one loan - You should not introduce yourself to the lender as a credit seeker. Additionally, every time you apply for a loan, a hard inquiry is initiated on your credit report, which has an impact on your credit score. A borrower's credit score will struggle if he or she receives too many hard inquiries.
Determine the amount with care - It is important to take a personal loan for the exact amount required. Because you are taking the loan to improve your credit score, the loan amount is an important consideration. Determine your need first and then apply for a loan.
Make on-going payments - Taking a personal loan to improve your credit score will fail to serve the intended purpose if you default on or delay your EMI payments. Credit cards and personal loans, both of which are unsecured, have the greatest impact on your personal loan credit score. Make a concrete effort to pay your EMIs on time.
Do not pay off your loan early - If you have taken a personal loan to improve your credit score, you should avoid paying it off before it matures. Longer credit history is thought to be better. So, if you continue to make regular payments for a longer period of time, your low credit score personal loan will improve.
Do not rush into additional debts - As you begin to pay your monthly installments, your credit score for a loan will begin to improve, making you eligible for a variety of loans. The offers may appear appealing but they can have a negative impact on your credit score, so put the brakes on it.
Do not close your loan too soon - The lender considers both your short-term and long-term creditworthiness. Also, if you have the funds to pay off your debt before the term of your loan expires, make a lump sum payment instead of closing it prematurely.
Using Personal Loans to Your Advantage
It's enticing to want to splurge from your newly acquired personal loan but doing so will defeat your goal of improving your credit.
The best way to utilize the money is to pay off your credit card debts, if any. However, once you have paid off your credit card, it is best not to cancel the cards and keep them in order to keep availing the benefits they offer.
If you continue making on-time payments for six months to a year, you may be able to have your loan mortgaged at a much lower interest rate.
A personal loan can help you build a good credit mix and improve your credit score.
Personal loans can also help you pay off debt faster because you can select shorter loan terms.
A personal loan is useful not only for financial emergencies but also for improving one's credit rating. Consolidating your debt and then repaying it with a personal loan is a prudent way to go about it.
At Muthoot Finance, we offer personal loans with minimum documentation and attractive interest rates, including an instant loan without credit score. Visit your nearest Muthoot Finance branch or apply here for a personal loan, quick and easy.
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