How can a personal loan have a positive impact on your credit score?
New Delhi, May 31: The higher your credit score, the more access you will have to credit and the less interest you will pay. If you have bad credit, it will be more difficult for you to get affordable credit. Taking out a personal loan can help you pay off debt or build a good payment history, which can help improve your credit score.
Personal loans are a great option for financial emergencies because they don’t require leverage and are easy to apply for. Personal loans, despite their reputation for being expensive, can help you improve your credit score if used wisely. A few lenders are prepared to offer unsecured loans to people with “decent” credit scores if they meet other requirements.
Why is credit score important when using a personal loan?
TransUnion CIBIL, a credit reporting company, examines your credit and credit card activity and assigns a three-digit number to summarize your credit history. Your CIBIL score is a number between 300 and 900.
Credit score is calculated from your credit report information, including your credit history, repayment history, total amount owed, length of credit history, credit composition, and credit applications. the most recents. The other three factors make up 35% of your credit score, while your payment history and the total amount you owe is 65%.
Since your credit score is based on your credit history, lenders can estimate your risk of default and decide on loan eligibility and terms accordingly.
A CIBIL score of 700 to 750 is considered a fair score and may get you through the door depending on the type of loan. A credit score of less than 700 is considered poor and will likely result in loan rejection.
A personal loan can help you improve your credit score in the following ways:
Create a payment history
To build a good payment history, always make your personal loan payments on time. Your credit bureau score will improve if you have a good payment history. Always remember to make your monthly payments in full.
To consolidate your debts, you could take out one personal loan. This will reduce the amount of interest you pay on your debts and ensure that you pay off your personal loan systematically through IMEs.
Use of credit
Credit usage refers to the amount you owe against your credit card spending limit. Adding a personal loan to the package can lower your credit rating and improve your credit rating.
Improve the credit mix
The credit composition is factored into the credit scoring formula. The diversification of the different types of loans or lines of credit that you are currently paying is called a credit mix. Adding a personal loan to the package can help you improve your credit score as it shows that you have dealt with different types of credit before.
Importance of the personal loan EMI calculator
You will be in a better position to understand how your life and spending will have to change once the EMI kicks in if you know what your reimbursement amount will be. Calculating your EMIs before applying for a personal loan allows you to plan ahead to pay off your debts, avoiding missing EMIs and resulting in a bad credit score. One of the most appealing aspects of an online personal loan EMI calculator is that it can be tailored to meet your specific needs. You can keep experimenting with different numbers like loan amount, loan term, and interest rate to get results that suit your income and needs.
Simple Steps to Check Cibil Score
Many websites offer Cibil Score analyzes. To check your CIBIL score on the Bajaj Finserv website, follow these steps:
Step 1: Click on ‘Get your CIBIL score’
Step 2: Enter details like name and PAN
Step 3: Enter an OTP to verify
Step 4: Submit
Your credit report will be displayed. You can also pay a small fee to get your credit report, which will give you access to your detailed credit profile. You can also have access to how to improve your credit score.
If you are eligible for a pre-approved Bajaj Finserv personal loan. Get a loan of up to Rs.25 lakh approved quickly and use the money to cover all expenses. You have the option of repaying the loan over a flexible period of up to 60 months.
The personal loan is the best choice in the event of a pandemic
Whether you are planning your wedding, financing a trip to your dream place, renovating your home, dealing with a medical emergency, or expanding your business horizons, the personal loan will help you in a pandemic without having to worry about collateral.
Article first published: Monday May 31, 2021, 8:08 PM [IST]