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Instant Personal Loans - Credit score calculation and expert tips to improve it

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In today's credit-driven world, your credit score is more than just a number. It can open doors to financial opportunities or keep them firmly closed. 

Whether you're applying for instant personal loans from a Non-Banking Financial Company (NBFC) or any other type of credit, your credit score plays a significant role in the approval process. We’ll provide practical strategies to help boost your score and improve your chances of securing a loan from an NBFC.

What is a Credit score and how is it calculated?

A credit score is a numerical representation of the creditworthiness of the borrower based on his past credit behaviour that determines the risk associated with the lender while granting instant personal loans to the borrower. 

Following is the scale that lenders use to determine the quality of the credit score - 

  • Below 580 - Poor
  • 580 to 669 - Fair
  • 670 to 739 - Good
  • 740 to 799 - Very Good
  • 800 and above - Excellent

How is credit score calculated?

The credit score is calculated based on the following significant factors - 

1. Credit Utilisation Ratio -

It is the amount of credit you have used against the total available credit that you’ve been granted. It is suggested to not exceed 30% of your credit card as it might impact your credit score. Maintaining the credit utilisation ratio is crucial when applying for instant personal loans.

2. Credit Age - 

Having an old credit card or loan is beneficial for lenders to make an informed decision while granting instant personal loans to an individual as it indicates the trustworthiness and creditworthiness of the borrower. This gives a boost to your credit score as it shows that you have handled your past credit well.

3. Hard enquiry - 

Whenever you apply for instant personal loans or any other credit, lenders check your CIBIL Report from the credit bureau which is known as a hard enquiry. Having multiple hard enquiries can badly impact your credit score. So, avoid having multiple lines of credit all at once.

4. Payment History - 

Timely Credit payments and Equated Monthly instalments (EMI) make up to 35% of your credit score. So now you know the importance of payment history in calculating your credit score. Default in payment history can impact your credit score which will further make you non-eligible for instant personal loans and other credit requirements.

Proven Strategies to Improve Credit Score

Improving your credit score doesn't happen overnight. It requires discipline, consistency, and patience. Let's explore some proven strategies to enhance your credit score.

1. Obtaining at least one credit product

Having no credit history creates difficulty in obtaining instant personal loans or other credit requirements. Having a credit product (Ex: A credit card) can boost your credit score significantly.

2. Timely payment of bills

Timely bill payments are a cornerstone of maintaining a good credit score. Missed or late payments can negatively impact your score. Additionally, paying your bills in full rather than just the minimum amount helps reduce your total debt, further boosting your score.

3. Reducing credit card utilisation ratio and clearing existing debts

A lower credit utilisation ratio is better for your score. Therefore, try to keep your credit card balances low. Paying down existing debts can also contribute significantly towards improving your credit score as it reduces your overall debt burden.

4. Limit hard enquiries 

Applying for various lines of credit simultaneously gives a wrong hint to the lender that creates the possibility of loan rejection. Apply for instant personal loans or any other credit requirement only when genuinely needed.

Conclusion

In conclusion, your credit score plays a critical role in securing a loan from an NBFC. But don't be disheartened if your current score isn't where you want it to be. With discipline, consistency, and the right strategies, you can improve your credit score over time.

Remember, small changes can make a big difference in the long run. Your dream of securing an NBFC loan can become a reality with a little effort and dedication towards improving your creditworthiness.

If you are seeking an instant personal loan then -

You should consider Nitstone Finserv which provides Quick Approvals, Gold Loans and Instant Personal Loans disbursement within 24 hours and makes your journey hassle-free with endless financial opportunities. 

Written by -

Aastha S Khivesara 

 

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