A credit score is a reference card for lenders to analyse how good you are with borrowed funds and your ability to pay back the loan. In simple terms, a credit score above 700 categorises you to be a trustworthy borrower, while a lower credit score may lead to limited deals and higher interest rates. While a good credit score is a term we’ve often heard about, little do we know how one achieves it.
We unveil top 7 secret tips to enhance your credit score to get better deals for your car loan.
Track Credit Usage Against Credit Limits
Every credit card comes with a defined limit assigned to every customer based on their income, previous expenditure and payment patterns. To maintain a good credit history, make sure you do not reach the limit month after month. An ideal ratio of 30% can be considered healthy and easy to maintain. You can also set a customised limit based on your expenses to keep a cap on your spends.
Choose a Tenure Wisely
Tenure is the duration allotted to pay back the loan. Choose the tenure that fits your income and expense flow through the duration. Consider unforeseen expenses as well. Adding a few extra months in your estimated tenure gives you a cushion to ensure timely payment, and plays an important role in achieving good credit score.
Always Pay Your EMI on Time
The previous point leads us to the importance of paying your EMI on time. Lenders view late payments negatively, which may be a hindrance for loan approvals in the future. Analysing a flexible tenure for yourself and setting reminders for payments, will prove to be a fruitful solution.
A Good Mix
To maintain a healthy credit score, have a credit history with a good mix of secured loans such as car and home, to unsecured loans like personal and credit cards. That being said, don’t take too much on your plate. It’s advisable to take one loan at a time and pay it off first before you take another, to avoid any mishaps in the future.
Maintain Older Credit Cards
A longer credit history means more instances for the lender to analyse your credit score and payment patterns. They show a richer credit history and enhance your credit score. Make small purchases to keep your previous credit cards running to increase your credit score. You can opt for auto-debit of EMI to avoid missing out on your payments.
Review Credit History
Your financial history may not be the only reason for a bad credit score. Sometimes, there are errors from the backend while filing your report, thus leading to a lower score. Review the report thoroughly and in case of discrepancies, file a report by submitting a Cibil Dispute Resolution form available online. If there are shortcomings on your end, fix them in the future.
Avoid Making Too Many Credit Inquiries
Try and avoid making too many credit inquiries as it may adversely impact your credit score. Experts suggest one must opt for credits only when it’s necessary. Opening multiple credit accounts reduces the average credit age, therefore, maintain few accounts but well.
No change takes place magically overnight. In case of enhancing or reviving your credit scores, it may take 6 months to a year to reflect on your credit report. While you weave these habits into your credit-debit lifestyle, Kuwy understands every customer and their needs. With instant digital car loans for every kind of credit history holder, Kuwy is your friend for life. Create your personalised car loan card on the Kuwy app, today.