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Here’s what your credit score says about you

It doesn’t really matter if you have a huge amount of savings in your home safe or are storing money under your mattress. What a lender is going to look at is your credit or CIBIL score, which is basically a report of your financial status. It is a spread sheet of how efficiently you are managing your finances, and if you are paying dues and bills on time or allowing yourself to default on debt repayments. 

What you credit score says about you?

A CIBIL or credit score is what lenders use to take the ultimate decision regarding sanctioning your loan or not. This may be a personal loan or other loans such as car loans or home loans. So it is imperative that you take it seriously. A credit score is a 3-digit number between 300 and 900 that is computed by taking a glance at your financial history and behaviour. It shows how well you have dealt with debt in the past and thus gives the lender an overview of how you will continue to treat debt in the future. It tells the lender if you are responsible while repaying debt or if you take it casually or even act cavalier with it. So lots of credit cards, missed EMIs on past loans, overdue credit card payments, only making the minimum amount credit card balance payment every month, numerous loan rejections, etc. all affect your credit score adversely. Thus, a low credit score often increases the rate of interest of a loan, as a lender will view you as a more risky borrower than one with a higher score.

How to improve credit score?

Do you want to know how to get a personal loan with bad credit? Work towards improving your credit score. First, pay off all pending debt using better money management, any salary bonus or additional income. Then maintain a good record by paying your credit card bills on time (and not just the minimum amount) and paying any and all EMIs on the due date without defaulting. One default once in a while will not make much of a difference, but making it a habit will bring down your credit or CIBIL score in a way that it will become difficult for you to get a loan instantly if you are really in the need for it. A bad credit score is something that will make the lender judge your financial capabilities. So if you have the ability to repay the your debt by any means, pay it back and keep your credit score record up.

Minimum credit score 

The minimum credit score that you should maintain at any given time is around 700. Anything lower is deemed below the line of requirement. And instead of applying for a loan with that score, it is advisable that you don’t apply at all. First, work on improving your credit score and bring it up to the mark, then you may apply for a loan as you please, of course by keeping your eligibility in mind.

What makes your credit score good?

It is not necessary that your score will be good if you have not used a credit card in a few year or haven’t taken any loans in the recent past. It is more important to have a credit history of some kind, as this reflects on your score. And how you dealt with these financial situations defines your credit score. So don’t be under the misconception that no credit equals a good credit score. Borrowers often take a smaller loan in order to build their credit history if required.

A personal loan for a low CIBIL score borrower may incur higher interest, but does help both in times of need as well as to pave the way towards improving your credit score. Different lenders have different terms and conditions for sanctioning or approving a personal loan request. In case a personal loan applicant with bad credit checks all the right boxes when it comes to eligibility—such as income, a steady job, the right age, etc., then a lender will still approve the loan request.

As you search for the right personal loan to suit your needs—be it to finance a wedding, send your children for higher education, renovate your home or even for a medical treatment, consider NBFCs. With Personal Loans from bank and NBFCs, you have the option of taking an amount on a line of credit, paying interest only on the amount you actually use, rather than the whole principal. Since helps save you needless interest payments and keeps your costing in check.

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