November 17, 2017

Sreekanth B

What How Credit Score Needed For a Personal Loan

What Credit Score Do You Need for a Personal Loan?

If you apply for a loan these days, your credit score is one of the first things to be checked by the bank. This credit score is a ‘snapshot’ view of how credit worthy you are as an individual, i.e. do you pay your credit card bills and EMIs, if any on time; do you max out your cards; in essence how financially well-disciplined you are.

Your credit score thus becomes very important as it indicates to the bank to which you have applied for a loan, how safe is it to give you one.

So how does one ensure that their credit score is a good number?
  • First of all, you must have a credit history, which will happen only if you have a credit card and have taken some loan or the other in the past. So if you have never taken a loan before and don’t use your card much, your credit score will not reflect anything.
  • Make your loan repayments on time; always pay your EMIs on time.
  • Pay your credit card bill well in time.
  • Minimum balance due is a trap – don’t fall for it. You only avoid late fees by making such a payment. Interest is still charged and heftily at that.
  • Having more than 2 or 3 cards is detrimental to your credit score. While this may give you a higher credit limit, it shows a dependence on credit and you may not get new loans easily.
  • Don’t MAX out your cards. You should not use your cards more than 25 to 30% of the card limit. And use all your cards equally.
  • If there is an issue with a credit card/bank about some outstanding loan or balances that you couldn’t pay, don’t go for ‘settlement’ by paying only part of the amount, as this will reflect badly on your credit score upto even 7 years. It is better to make a payment in full for all such dues.
  • Any number of secured loans like a car loan or a home loan is fine but more the number of unsecured loans like personal and credit card loans, lower will be your credit score.

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