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Credit score is the first impression that you make on the lender while applying for a loan. When it comes to securing a personal loan, the credit score can either help you get it or restrict you. Lenders check the credit score to understand a person’s financial credibility and decide whether they are financially capable of repaying the loan or if they are a trustworthy borrower. Whether you want a small personal loan or you are planning for a long-term installment plan, it is important to know the credit score and how to improve it.
In this blog, you will understand the basics of credit score, why it is important, and what are the ways to improve credit score for better loan approval chances.
A credit score is a representation of a borrower’s repayment ability or creditworthiness; it typically ranges from 300 to 850. It is calculated by various factors like credit history, repayment habits, outstanding debts, length of credit history, and types of credit in use. The higher the score is, the more the chances of getting approved for a loan with favorable terms increase.
Given below is the list of credit score ranges from excellent to bad:
If you’re aiming for a personal loan with a low credit score, most lenders prefer a score of at least 650. If the score is less, you may be eligible for a bad credit loan, but you will be charged a higher interest rate.
A credit score is important for a loan approval because it gives an understanding of your creditworthiness to the lenders. It tells them of how responsible you are with credit. A good score not only increases your approval chances but can also help you in many ways, like:
A low score, on the other hand, may result in rejected loan applications, higher interest, or stricter terms.
Before applying for a loan, it’s important to check your credit score to know where you stand and how easy or difficult it will be for you to get a loan and what the terms of the loan are. You can use free credit score services to check your score. Regular credit score checks can also help you detect inaccuracies or fraudulent activity early.
Instalment Express recommends reviewing your credit report at least twice a year and after every major financial decision, like taking out a new loan.
If you don’t have a credit score, you should focus on how to improve it. Improving the credit score takes time, but with discipline and consistency, it’s possible. Here’s how you can improve:
It is important that your payment history is clean because payment history is the most important factor that affects your credit score. Even a single missed payment can hamper your score. Hence, one must set reminders or use automatic payments to stay on track with the payment dates.
Keeping your credit card balances low as compared to your total limit. Ideally, the credit utilization ratio should be below 30%. For example, if your credit limit is Rs. 10,000, try not to exceed Rs. 3,000 in outstanding balances.
Each time you are applying for loan, an inquiry is made, which can lower your score temporarily. Multiple applications in a short timeframe can signal financial instability to the lenders.
Length of credit history matters. Keep older accounts open, especially if they have a positive repayment record. They add depth to your credit profile and improve your average credit age.
Having a mix of credit types—credit cards, personal loans, retail accounts, or auto loans—can improve your score. Just make sure you’re managing them responsibly.
Mistakes happen. If you spot incorrect information, such as late payments or accounts you don’t recognize, report it immediately to the credit bureau to have them corrected.
If you have a low score or limited history, a credit-builder loan can help. These are small, manageable loans designed specifically to help you build or rebuild credit.
If your credit score falls in the lower range, don’t give up. Instalment Express specializes in helping individuals with less-than-perfect credit access financial solutions through various loan options. While your loan terms may differ, it gives you a chance to rebuild your score over time.
Your credit score is more than just a number; it’s a key that can unlock better financial opportunities. By making smart financial decisions and staying consistent with your repayments, you can gradually improve your credit score and enhance your chances of getting approved for a personal loan.
At Instalment Express, we understand that every credit story is different. Whether you’re looking for quick credit access, to check your loan eligibility amount, or anything relating to quick credit, we’re here to help. Our flexible loan options are designed to support you at every step of your credit journey. Check your eligibility and apply for a personal loan with Instalment Express today.
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