Need to improve your credit score, but don’t know the right way? Well, you can always take a personal loan. Read on to find out more.
How a Personal Loan can work magic on your Credit Score
How can a personal loan help your credit score? Well, one of the factors that affect your credit score is the ratio of outstanding balance to the available credit. Now if you’re using a credit card that has reached its credit limit, it’ll show on your credit score. But a personal loan is treated differently because of its repayment schedule.
In other words, your personal loan will not affect your credit score as much as a credit card that’s near its limit. But since a personal loan does make an impact on your credit rating, taking one and doing the right things can prove to be quite beneficial for it. Mentioned below are a few tips to improve credit score using a personal loan.
Look for a Low Interest Rate Loan
In order to improve your credit score, you need to have a flawless repayment history. So it’s essential to take a loan with a low interest rate that you can easily pay back. Consider choosing a low-interest personal loan from Bajaj Finserv. Here, you can get an instant approval within 5 minutes.
Maintain a Positive Payment History
A personal loan can never hurt your credit score as long as you make the monthly payments on time. Maintain a good repayment record; it will definitely work in your favour.
Loans with Repayment Periods of Three to Four Years
After you’ve found a personal loan with a low interest rate, consider a three to four-year tenure. This is because your credit rating is evaluated over extended periods of time; so repaying a loan over 3 years or more is definitely more effective than paying it back within a year. At Bajaj Finserv, not only can you take a personal loan spread across 36 months, but you can also make prepayments at no extra charge.
Paying More than the Minimum Due Amount
If you pay instalments that are greater than the due amount, it’ll reflect on your credit record. So if you’re looking to find a loan with more scope for repayment, then Bajaj Finserv would be a smart option, as it lets you make up to 6 prepayments in a calendar year.
Once you make consistent payments and owe less than 30% of the due amount, your credit score will begin rising again. Improving your credit score requires consistency; so if you reach a low balance before the due period, it’ll definitely help your cause. This is how personal loan helps to improve credit score.