How a Credit Card and Personal Loan can improve your Credit Score

It’s 2018 and everyone here in India is finally showing a lot of interest into the financial markets. Yes, there is a steady rise in the investments by domestic investors. Who knew that investing in mutual funds can also give us good returns like fixed and recurring deposits do.

How Informed is today’s investor?

The average investor today is well informed about the current trends. Gone were the days when we listened to where Mr.Sharma or Mr.Verma were investing and followed them like sheep. Today, a customer knows what his /her financial goals are. They know what an “SIP” stands for and also know the importance of Insurance. “Kitna Deti Hai?” is what a customer today will ask not only to know the mileage of a car but also to understand the returns a mutual fund provides.

Importance of Credit Score:

There is something else that also needs our immediate attention i.e. CREDIT SCORE. Yes, you must be seeing the term “credit score” almost everywhere online. A credit score helps the Banks and NBFC’s in the market to understand the credit worthiness of a person. The scores range from 300-900. The mantra here is “Higher the better”. In India any score above 750+ is considered to be a good credit score.

How can you increase your credit score?

Firstly, your credit score takes time to build up and hence a person with at least 6 months of credit history can find out his/her credit rating. You can avail the services of a credit card or a personal loan.

Using a credit card with a lower utilization ratio and paying off the bills on time completely can increase your credit score with time.

When you take a personal loan and repay the EMI’s on time without defaulting even once, it is considered as disciplined borrowing by the lender.

It is very important to have a good credit score today as a score above 800 shows that you are a disciplined borrower. The lenders can provide you loans at a lower rate of interest. There is also a possibility that they might waive off certain fees like processing charges and prepayment penalty. But if your score is lower than 700, it can get tough to get a loan from any Bank/NBFC as you are not credible as per the lender. A low score means that you might default on payments or might not be able to repay off the loan. Hence in these cases, the lender will impose a high rate of interest on your loan.

Hence, be wise and save yourself from this trouble. Use a credit card wisely and pay off your loans on time. This will help you in the present and also in the future.

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