Your credit score is an
important statistic in the financial sector. It signifies your financial health
and stability. Thus, the credit score plays a crucial role, especially when you
apply for loans. Thus, you should know everything about your credit score as
well as the dos and don'ts associated with it. A high credit score will allow
you to get loans easily from banks and AI digital lending platforms. Check out the credit score guide given below.
What does your credit score signify?
The credit score of any individual ranges between 300 to 900. It is used to determine the creditworthiness and financial strength of the person. Thus, the higher the credit score, the more finances the person has, and they have a higher chance of repaying the borrowed loan completely within the due date. Banks and AI digital lending platforms favor individuals with a high credit score during the credit underwriting process of the loan application. On the other hand, a low/poor credit score will diminish the borrower's chances of getting their loan application approved.
Tips to increase your credit score
These tips can increase your credit score, which can help you in future loan underwriting processes at banks and AI digital lending platforms.
●
Increase credit card limit:
If you wish to get a high credit score, you should ask your credit card issuing
authority to increase the credit limit on your card. But remember to have a
spending limit of lower than thirty percent.
●
Timely payment of EMIs and
bills: You should pay your credit bills, debt payments, and other EMIs in full
amount before the given due date.
●
Check credit score and
report regularly: You should do a real time credit score check as well as inspect your credit report. The credit report
provides a detailed account of your credit history.
Things to avoid to keep your
credit score healthy
When it comes to checking real time credit score and managing it, you must first minimize committing actions that can lower it.
●
Late payments or
defaulting: If you have a habit of paying debt installments and credit or
utility bills after the due date, it can negatively affect your credit score.
The late payments can get recorded in your credit history and make it harder to
pass future credit underwriting processes.
●
Passing the limit on
credit cards: When a financial institution does a credit risk management for an individual, they advise to keep credit card expenses to
thirty percent or lower than the total credit limit. Spending more than the
approved limit frequently can lower your credit score.
● Making new credit applications too soon: During a new credit application, the concerned authority does a credit risk management check on the applicant. This is called hard checking and is recorded in the applicant's credit history. As this hard check stays on the credit history for about a year, making new credit applications during this period will further jeopardize your credit score.
These are the things that
you should know about credit score. Having the correct information will help
you to obtain a high credit score and maintain it. Thus, you will have an
easier time in passing the loan underwriting processes.
