A credit score is a vital factor in ascertaining whether or not a prospective borrower will be approved to receive a loan or not. The idea is to draw upon the credit history of the borrower and to identify his past credits taken, and the payment patterns in them. Having a high credit score suggests a state of being highly credit worthy, while having a low score suggests low creditworthiness – which also leaves room for the prospective borrower to be perceived as a risky borrower, or lacking a tendency of committed repayment.
Here are seven ways in which you can help up your credit score, so as to receive a loan as your requirements warrant.
Don’t apply for too many loans
Avoid applying for too many loans in quick succession when you discover a low credit score. Going to another bank to borrow a loan might seem like an idea to try, but it is not the best thing to do – because potential lenders also make enquiries about your credit score. That itself, is enough to lower your score. Allow yourself room to stabilise first, and then borrow more if need may be.
Structure repayment in a tactful manner
Always ensure that you don’t default on your repayments, and even if you do, make sure that you don’t allow these defaults to pile up. When you pay back on time, it will reflect on your credit score and encourage a positive reputation.
Maintain a balanced debt portfolio
Debt portfolios should have a good mix of secured and unsecured loans. However, it is also recognised that secured loans help increase your credit score. When you take unsecured loans, make it a point to discharge them at the earliest so that you are not in a quandary for repayment.
Follow a wise route of using your credit limits
Availing credit is not the only thing that is evaluated, it is vital to make sure that you use your credit as wisely, too. Up to 75% of your approved credit limit is a good idea, on your credit cards. Don’t indulge in reckless and uncalculated spending – instead, follow a pattern of calculated spending.
Maintain proper documentation
Keep track of your credit reports to avoid any mistaken entries or discrepancies. Also make sure to keep your own records, invoices, payment acknowledgement slips and such else in perfect order – this will help you keep a clean credit report.
Consolidate multiple debts to enable managing them
Imagine taking a consolidated debt and paying it all off at once – you will gain amply by making the process of repayment all the more affordable.
Keep track of your credit score
Keep your credit score in your line of sight and make it a point to keep an eye on it a couple of times a year. This will help you study your repayment and borrowing trends, and ultimately smoothen out the manner in which you do both.
While it is easy to emphasise on the need for a good credit score, it is also as difficult to quite acquire one, or for that matter, to stabilise with a good one after a bad spell. It can take a lot of time to build up a good credit score, but the key to it is to sustain a uniform approach to the very process of borrowing and repaying loans.
