If you have ever applied for a loan, you know the importance of having a good credit score. Along with reflecting your creditworthiness, this three-digit number influences your loan approval and the interest rates you are charged. Naturally, you want to maintain a high score (750 points or above). However, this is an uphill task, especially when you have a high credit utilisation or you are at the start of your financial journey.
However, believe it or not, one of the most fool-proof ways of raising your credit score is by securing short-term credit like a small personal loan. Curious how? Let’s find out.
Pay off your debts
If you didn’t know already, taking several loans in a short span can hurt your credit score. What’s more, it also makes it hard to keep track of your debts. In such a case, resorting to personal finance to pay off your dues through debt consolidation is a wise choice. Not only do you clear your unpaid debts without dipping into your savings, but you also get to restart debt repayments at a manageable personal loan interest rate.
Additional read: Tips to Improve Personal Loan Credit Score
Timely debt repayments
Running short on funds to make loan repayments? Don’t wait for a missed payment to leave a mark on your credit report and lower your credit score. Apply for a debt consolidation loan with a trusted lender to help you out.
Doing this puts an end to a spotty repayment history and it also helps you build a history of timely debt repayments from scratch. The best part? You even get to select an EMI plan that works with your budget before getting a loan. This means you can repay your debts on your own terms. Need help choosing a suitable EMI plan? Use a personal loan EMI calculator online.
Reduce your credit utilisation
Having multiple lines of credit that are close to the spending limit is a sure-fire way to reduce your credit score. Why? Because it shoots up the Credit Utilisation Ratio (CUR), thereby lowering your credit score. So, bring your credit spending under control by transferring the balance to a personal loan. This reduces the CUR from individual credit lines and raises your credit score.
Increase credit mix
Your credit mix plays a crucial role in determining your credit score. So, if various credit cards are your only credit lines at the moment, diversify your credit mix a little with small loans. Adding these loans to your credit mix reflects that you have the experience of handling various types of credit, thereby increasing your creditworthiness and your credit score.
Getting a small instant loan to increase your credit score might seem counterintuitive at first, but it works effectively to raise your credit score. So, apply for small loans onlinewith a trusted financier like Tata Capital.
Along with affordable loan rates and repayment tenures, we also offer quick disbursals and unmatched after-sales service. Connect today!