Each one of us need some financial backup, here and there. Taking a loan to help ourselves is no new practice. But, do you know that taking personal loans not only helps you in meeting the urgent financial crunches but also in building your credit score? Credit score is nothing but simply your ability to repay the loans. Having a credit score of 750 or above helps you land at a safe place to avail the loan. Know how personal loans help in building your credit score:
- Choose a loan with lower interest rate: out of all the available loan options, go for the one which has the lowest interest rate. This will make sure you pay the installments with convenience.
- Borrow small amount: taking loan of a small amount is the sensible most thing to do. If you take small loans, not only will your installments will be small but also the chances of missing out on paying the EMI reduces. There is no point taking a huge debt and not paying back in time. This would in turn adversely affect your credit score.
- Make regular and on-time payments: delayed or missed loan EMI payments will affect your credit score. The payment history plays an important role when it comes to your credit score.
- Use your personal loan to settle high interest rate credit card bills: if you use your personal loan to repay your credit card bills, you will achieve two things; firstly, you will be free from that part of the debt and secondly, you will improve your credit score.
- Do not repay the loan before maturity: this is one mistake which most of us do. Never repay your loan completely before its maturity even if you have enough money to do it. A longer loan tenure is preferred over a short one, it helps the credit score to a large extent.
- Don not take other debts: once you see that your credit score is building up and you still have some installments left to be paid, ‘DO NOT’ apply and take other debts. This is not a healthy practice and taking multiple loans at a time ruins your credit score so much.
Read More – How is Credit Score Relevant to You?
Taking loans is easy if you have a good credit score and a good payment history. There are various loans in the market one can take. But, if building your credit score is the main reason, then you should go for the personal loans as they do not have any security or collateral involved. Home Credit lends the cash loans without much to do. Just follow simple 7 steps and verify your phone number and UID.
Get your loan, repay and improve your credit score!