A credit score is a medium to measure your financial stability and health. Before providing you funds, lenders ensure to pull out your credit score. This is an essential element as credit companies and lenders judge you based on your score. Your score is extremely important because it affects your financial health in a major way. For instance, a strong score will allow you to instantly qualify for an instant credit loan. Also, with a good credit score, you can avail a loan at a low rate of interest. Alternatively, a low credit score can come across as difficulty in situations when you need immediate fund access. In today’s era, availing of a personal loan has become common for which credit score is checked. Also, for an SBI credit card CIBIL score is important. The same applies to other credit cards i.e., the CIBIL score for credit card approval is important.
What is a credit score?
A credit score is a 3-digit number representing your credit report rating. Also, it throws light on the approach of how you handle or manage your debt. Almost all Indian finance lenders consider credit score to be the benchmark to analyze your financial appetite.
Different credit rating companies make sense of your reports to compute your score and forward it to distinct financial institutes and companies. Your score can decrease in any of the ranges of 300 and 900 to deduce your credibility. Distinct rating companies might assign you a distinct credit score. A major reason for differences in credit scores is distinct methodologies utilized by different credit rating companies. Also, distinct rating bureaus rate you at distinct times, thus there may be a difference in credit score owing to this also.
You cannot track your score from all rating bureaus. So, it is best to keep a thorough tab on the scores generated by the well-known bureaus that are preferred by all kinds of lenders. Tracking 1 or 2 top credit rating bureaus endows you with a complete idea about your performance, basically debt-wise.
How are credit scores computed?
Credit scores are calculated after factoring in distinct parameters. They determine how simply you will receive acceptance for the request for debt. A credit score reveals the lenders the risk they may have upon approving your request for credit. With it, you can check where on the spectrum you fall by reviewing your score online from different financial lending marketplaces. You may also consider fetching your credit report straightaway from any of the credit bureaus. Note that you are allowed to fetch 1 free report every year from each of the credit bureaus.
Your credit score shows your risk profile in the listed ways –
∙ Credit score of between 750 – 900 indicates your responsiveness towards debt constituent. A credit score of this range shows that you are extremely careful in making the debt repayments.
∙ Next, a credit score in the range of between 700 – 750 is looked upon as average by many credit-rating companies.
∙ Most individuals hold a credit score in the range of 600 – 750. You might get a personal loan with such a credit score.
∙ In case you have a credit score of below 600, it is extremely tough to avail of a personal loan.
If you hold a low score, you should first consider ameliorating your score. Once done, you can start reaching out to lenders. Note that a credit score is nothing but a prediction rating. It is formed to show your chances of making repayments timely to the bank lenders. So, your score keeps a constant check upon your misdemeanours for making your repayments.
When do you witness loan rejection?
Getting approval for personal loans with low scores by instant loan apps or banks is tricky. At times, your application may be turned down owing to your credit history. In case you hold a low CIBIL score and are looking to ameliorate it, you must ensure to counter the basic causes for the low score. Additionally, you should know important ways to ameliorate it to avail personal loan approval of your choice.
Listed below are ways to ameliorate your low credit score –
A low score may face loan rejection. Mentioned below are basic causes for low credit scores –
High credit usage – It negatively affects your score when you utilize more than 30 percent of your credit card limit. You must keep a thorough check on your expenditures and stay mindful when managing your loans when you are working towards improving your score.
Multiple outstanding loan payments – Before giving approval to your instant credit loans, lenders often tend to look at your financial history. If you have a score of below 750 with multiple payments or debts, your application may get turned down.
Applying for a loan even after witnessing rejection – Continue applying for a loan through the instant loan application even after witnessing rejection owing to your bad credit history will not fetch you a loan. Once you place the loan application and witness rejection, this info is stored in your report. So, whenever you apply for a loan with any new lender in the hopes of availing a loan approval, the lender will see this info. Also, the creditor will see your low score and turn down your application again. Doing so may reduce your score even more.
What are the mediums to ameliorate your low credit score?
A low score cannot get you a loan in occasions of need. However, there are different ways by which you can ultimately increase your credit score. Listed here are ways to ameliorate your score and successfully place the application for a loan through instant loan apps –
∙ Refrain from placing an application for multiple loans in a short time span
∙ Avoid missing out or delaying any loan repayments
∙ Review your credit report periodically to detect any errors or discrepancies and instantly file a correction request. Doing so automatically enhances your credit score and your loan eligibility chances.
∙ Use the credit card just as per your repayment capacity and avoid going over the limit as this can push you into a heavy debt trap, which ultimately reduces your credit score.