How to Boost Your Credit Score Through Personal Loans?

Highlights

Indians are increasingly relying on credit cards or loans to manage their regular expenses and to make big-ticket purchases.

Indians are increasingly relying on credit cards or loans to manage their regular expenses and to make big-ticket purchases. Financial institutions, like banks and non-banking financial companies, offering these credit facilities usually check your CIBIL score, along with other parameters like income, work experience, etc., to assess your creditworthiness and decide your eligibility for availing of a loan or credit card. A higher credit score improves your chances of getting approval on your loan or credit card application.

Read on to know more about the minimum credit score required to increase your chances of loan approval and how you can improve your score by availing of a Personal Loan.

What is the Minimum Credit Score Required for Loan Approval

A credit score of 750 and above improves your chances of getting a loan facility at lower interest rates and favourable terms. To boost your credit score, you can follow healthy credit practices like repaying your EMIs or credit card dues on time, avoiding multiple loan applications within short durations, regularly checking your credit report for inaccuracies, maintaining a good mix of credit, etc.

How a Personal Loan Can Help Boost Your Credit Score

While a Personal Loan can help you manage your urgent financial requirements, it can also help increase your credit score and improve your eligibility for availing of other credit facilities.

Follow these steps to know more:

• Build Your Credit History: Repaying your Personal Loan EMIs within the due date helps build a good payment history. This, in turn, can boost your credit score and increase your eligibility for availing credit facilities in future.

• Reduce Your Existing Debt: If you haven’t repaid your existing loan or credit card dues, it will attract high penalty charges. The interest on the unpaid dues will also add to your financial burden. To resolve this problem, you can opt for a Personal Loan at a lower interest rate to clear off your debts, reduce your credit utilisation ratio and improve your credit score.

• Consolidate Multiple Debts: If you have multiple loan or credit card accounts, you can avail of a Personal Loan at a lower interest rate to consolidate existing debts. Doing so can help you reduce overall interest costs and simplify your monthly repayments. Additionally, it will help reduce your financial burden and improve your credit score.

When You Should Apply for Personal Loan

Although many financial institutions offer Personal Loans with no collateral requirements, minimal paperwork and easy approval, you should apply for such loans only when you need them. Here are some situations where a Personal Loan can be useful:

• Medical Emergencies

With rising healthcare costs, you may face a financial crisis when dealing with sudden medical treatments. Many lenders offer Personal Loans with quick approvals, ensuring fast access to funds during medical emergencies.

• Debt Consolidation

Repaying multiple credit card bills or EMIs of existing loans can become a major financial burden if you do not have the requisite funds. You can opt for a Personal Loan at lower interest rates to consolidate your existing debt, reduce your interest burden and simplify your repayments.

• Higher Education

Pursuing higher studies from prestigious institutions can help boost your career prospects. However, paying the tuition fees, accommodation expenses, exam fees, etc., can burn a hole in your pocket. Choose a Personal Loan option to pay all your education-related expenses and reduce your financial burden. With minimal eligibility requirements and an easy loan approval process, a Personal Loan is an ideal option to finance your higher education.

• Home Renovation

Whether you are remodeling your kitchen, repairing a leak or revamping the interiors, you need a large amount of upfront cash. In such situations, you can opt for a Personal Loan to help you easily manage home renovation expenses.

To Conclude

While a Personal Loan is an attractive option to cater to your urgent requirements due to its unsecured nature, it can also help improve your credit score significantly. Managing the repayment of your Personal Loan responsibly helps lower your debt burden and create a positive credit history, which in turn will have a positive impact on your credit score and increase your eligibility for availing loans or credit cards in future.

(No Hans India Journalist was involved in creation of this content)