Why and How to Improve the Credit Score?

If you have ever applied for a loan, you will notice that the first thing the lender does is, check your credit score. While some might feel that this is a part of the procedure, only a few know why the lender does so. Your credit score plays a major role in deciding the interest rate of your repayment. A good credit score enables the lender to charge you with a lower interest rate. On the other hand, a poor score attracts high-interest rates and even leads to loan application rejection. And even a single loan rejection lowers your credit score further. In such a scenario, it is crucial to improve your credit score. 

In-depth knowledge about credit score 

Understanding the process of credit scores will help you improve it eventually. A credit score is a number between 300 and 900. A score above 750 is considered good and if yours is less than that, you need to start improving it. Credit score builds up if you pay your EMIs on time and if you do not default on your payments related to credit cards. Your credit score starts to drop if we fail to follow the payment procedures. Therefore, your credit score is a direct reflection of your repayment capacity and punctuality. 

A lender will be happy to offer a loan to a borrower who has a high score as he/ she has prompt their worth with regards to repayment capability. On the contrary, a borrower with a low credit score comes across as a risky customer to the lender, especially in case of non-collateral loans. Lenders try to safeguard themselves from such ‘risky’ borrowers and are willing to lend only at a higher interest rate to ensure they do not lose in the deal. 

Sometimes, a terrible credit score even leads to a loan application rejection. Therefore, you need to maintain a score above 750 at all times. If you have a low score, do not apply for a loan without improving it. 

Tips to improve your credit score 

If you are in need of instant finance and are searching for a place where you can get instant loans, you can apply for a loan on a peer to peer lending platform. Even in a P2P lending solution, you will find many lenders if you have a good credit score. Here are some ways to improve your score. 

• Pay your EMIs and bills on time. 
• Create a financial plan which will help you with timely repayments. 
• Apply for a credit card only if necessary. 
• Maintain low balances on credit cards. 
• Do not close unused credit card.
• Do not apply for multiple loans or new credits as it leads to inquiries. 
• Keep checking the utilization rate of your credit card. 
• Resolve any errors on your credit reports. 
• Discipline yourself financially and monitor your credits.

These tips will help you to maintain a high credit score. Keep in mind that no financial institution lends you a loan or credit card without checking your score. So make sure to improve it.