Your credit score plays a crucial role in the lending market, especially when you apply for loans here. Thus, it is important to manage your credit score properly and learn about ways to increase it. It will help you to have a more successful credit underwriting process in banks when you apply for any type of loans here. Here are a few things that you need to know when it comes to managing your credit score.
Importance of credit scores in the lending market
The credit score ranges between 300 to 900 and is used to determine creditworthiness of an individual. It can be considered a numeric value that expresses how much financially responsible a person is and the chance of them repaying the borrowed loan within the due date. The higher the score is, the more favorable chances an individual has in the credit underwriting process in banks. Similarly, a low/poor credit score will diminish the borrower's chances of getting their loan application approved.
Be cautious against these actions that can lower your credit score
When it comes to managing your credit score, you must first minimize those actions that can lower it. Here is a list that you should avoid.
● Paying debt payments after the due date: 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 the future credit underwriting process in banks harder for you.
● Surpassing the credit limit in expenses: Banks and digital lenders favor individuals who keep their expenses to thirty percent or lower than their total credit limit. Spending more than that regularly can lower your credit score.
● Applying for too many new credit applications: Each new credit application is recorded in your credit history and affects it for about a year or so. If you wish to have a high credit score that can allow you to get favorable loans from banks and digital lenders, you should wait for at least 6 months to a year before applying for new credit.
Use these methods to boost your credit score
These tips can increase your credit score which can help you in future loan underwriting processes.
● Ask the credit card issuer to increase your 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.
● Pay your debt payments, EMIs and bills on time: You should pay your credit bills, debt payments, and other EMIs in full amount before the given due date.
● Check your credit report regularly: Your credit report provides a detailed account of your credit history. By inspecting it, you can easily track any anomaly present.
These are some tips that can help you to boost your credit score so that you can get more favorable loan underwriting processes in the future.
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