You have finally repaid all of your loans and closed them on time. You’ve got that Diwali bonus in your pocket for the down payment and all the paperwork ready to buy the car with the remaining amount on loan. However, your loan amount still gets rejected even after closing all previous loans and putting down a huge amount as a down payment. What exactly went wrong?
Well, you remember you paid a few EMIs of your last loan a little bit late. Also, you were obligated to take up that urgent small money loan at a very high interest rate due to an unavoidable emergency? That’s exactly why your current lender does not find you suitable enough to pay back a car loan.
When it comes to applying for a loan in India, the very first thing that lenders assess is your credit score. It is essential to have a fair or high credit score in order to be eligible for the amount you have applied for. Getting a loan on low credit score is almost an impossible task in today’s age.
So now that you know what plays a major role in getting that most-awaited loan approval, let’s understand five smart tips with which you can improve your credit score significantly:
- Pay All Credit Card Bills & Loan EMIs On Time:
The one thing that you can do to maintain a good credit score is to pay all of your credit card bills and loan EMIs in a timely manner. Even if you miss a single scheduled repayment, it hurts your credit score negatively and is quite difficult to reverse. Hence, if you have a tendency to forget bill payment dates, then you can set up auto-debit or reminders to ensure no late payments are made.
- Stick To The Lowest Credit Utilization Ratio:
This is applicable to those who own a credit card. If you have a credit card with a utilisation limit of Rs 1,00,000, then it is not at all advisable to utilise the entire credit limit. You should only utilise up to 40% of the credit utilisation limit as assigned to you by your lender.
- Have A Healthy Credit Mix:
A healthy credit mix implies diversifying your liabilities across unsecured and secured loans evenly. This enables you to demonstrate responsible creditworthiness to potential lenders. Diversify your expenses across credit cards and secured and unsecured loans.
- Avoid Too Many Credit Loan Applications:
Applying for a credit card or loans on a loan app in India implies a hard inquiry into your credit history every single time. Hard inquiries tend to negatively impact your credit score. Instead of running into too many applications at once, compare your loan offers and eligibility criteria and see if that particular offer suits your requirements.
- Regularly Check Credit Report For Errors:
Keep an eye out for any discrepancies that could appear in your credit report. Correcting even one major error can improve your score considerably and help your next credit loan application go through smoothly.
Building a strong credit score is a gradual process, but the payoff is lasting. With consistent payments, controlled credit usage, and periodic monitoring, you can steadily move from a low score to a healthy financial profile and get approved for a loan on almost any loan app in India.So before you rush into applying through a low credit score loan app or submit your next credit loan application, take the time to polish your credit behaviour. It not only increases your approval chances but also gets you better loan offers and lower interest rates.