Credit Scores are the numbers that indicate the likeliness of a borrower to repay a taken loan. Almost 90% of the times, your credit score is under the scanner while applying for a new loan. If you fall under the category of people who does not have a good credit score, it is likely that a loan you may apply for might get rejected. Also, having a bad credit score may lead to paying higher premiums or interest rates. Having a good credit score makes it easier for processing a much-needed loan. So, the borrower shall always focus on maintaining a good credit score to make it easier for getting a loan approved in the future. Here are a few tips on how to improve the credit scores –
The best way to improve your credit score is to pay back the loan on time. Defaulting a payment or accumulating debts will bring down the credit scores.
As the cautionary saying goes, “bite as much as you can chew”, it is wise to have debts that are manageable in the income level of the individual. If the debt value exceeds the income levels, there would be a possibility of late payments or of defaulting a payment. When the income levels are more than the debt values, it is likely that there will be regular payment of the debts. So, it is better to keep the Debt to Income ratio at a low.
Catch up on all the previous credit payment history and make sure to work out on a manageable repayment plan with the creditors. It may be difficult to get personal loans with a bad credit history. So, it is better to discuss with the lenders and creditors and chalk out a plan to make manageable repayments quickly and effectively in order to improve the credit scores.
The Installment loans allow the borrower to make scheduled and smaller payments over a manageable period of time. This is better than the short term payday loans where the borrower has to make the payments as a lump sum in a shorter time period. Taking an installment loan and repaying the installments on time will help in improving the credit scores. At such times, installment loans are also called as ‘credit builders’ as they help in building up the credit scores of the borrower when the payment is made rightfully on time. Also, installment loans do not create much financial strains as the amount and time period is scheduled. So, the borrower will have a good chance to make the payment on time and improve the credit scores when compared to paying back short term cash advance loans.
It is important to note that the credit score will build up only gradually over a period of time. In the meantime, it is important to follow habits that will positively affect the credit scores. These good financial habits include limiting the expenses, saving for emergencies and making regular payments of the acquired loans.
Following the tips will help in building a good credit score and also in maintaining a favorable credit history. Having a good credit score in return allows having better rates of reward and a lot of interest savings.
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