Most people can go for many months and years without using a personal loan; this makes their credit score/limit to be way too low. If your credit score is low and a sudden need for money arises, you will have a very difficult time in accessing a personal loan. If you have an urgent need for loan to pay for your house or car, you will have a very difficult time. Because of any eventuality and sudden need for money, you will need to increase your limit score so that you may qualify for personal loan. For you to take advantage of this financial tool, you will need to increase your limits. We will look at various ways of improving your credit score.
Credit scores versus credit rating
It is very important to know that credit ratings and credit reports are two different things.
Your credit report is based on your previous credit records. This report includes your loans and payment history. The rate at which you pay your debts is part of a credit report. If you were able to timely pay your loans, all the info on your commitment level will be included in your credit report.
Credit history determines your credit rating. If you are requesting a loan from a bank or a private money lender company, he will review your credit ratings that have been derived from your credit history. The lender determines your creditworthiness based on your credit ratings and payment history, income stability among other financial factors. A responsible money lender will not allow you to get money that you won’t be able to pay.
As we have seen, your credit worthiness is determined by your ability to pay your debts in time or within the agreed/specified period of time. Credit Bureau of Singapore determines your loan eligibility. If your credit rating is low, you will be less likely to access loan from a bank or any money lenders. Most of these financial institutions will not approve your loan.
Improving your credit score
1. Consolidating your debt
The surest way to improve your credit score is to simply consolidate your debts. This simply means consolidating/combining all your unsecured debts. What you just need to look at is the due date and the interest rate. If you combine all your debts, your credit rating and worthiness will improve. This will result to improved credit score. Nowadays, many people can hardy survive without a personal loan. A loan allows you to do the things you would have taken years to achieve. Securing a good credit rating is a great thing if you wish you request for loan in future.
2. Close off all the credit cards that you aren’t using
Avoid maintaining multiple credit cards. If you have several credit cards that aren’t in use, you should close them off. This is because multiple billing period, annual fees, and due dates could get you confused. If you have multiple credit cards, you will most likely miss your payments. It is important to know that a missed payment can damage your credit score.
What you only need to do to avoid such a scenario is to close off your credit cards that are no longer in use. If you are using your credit cards for personal finances, you don’t need more than three cards. Only keep the credits cards that are in use and those that have low-interest rates. By doing so, you will be able to manage your credit cards and save on yearly membership fees.
3. Spreading out your loan enquiry
It is a tremendous risk to send multiple loan enquiries within a short period of time. In the event that a loan verifying officer finds out that you have had 5-6 loan applications in one month, he will tag you as credit hungry. This also shows that you are at a financial crossroad or undergoing financial difficulty. They assume that, if you are facing a financial burden, you will not be able to pay additional loans; this simply means that the loan approval and verification department may decline your request.
The best way to deal with this kind of a situation is to do a good research and find the best money lender in your local area. Find the one with low-interest rate before making any application. You should also avoid making multiple loan applications from different money lenders.
4. Pay your loans in time
If you have any outstanding loan balance, you will need to pay your loans to improve your credit scores. Late payment will damage your credit scores are reduces your chances of accessing loans in future. If you just applied for a loan and it was successfully approved, you should take the advantage of that chance to pay in time and improve your credit worthiness. If your payment was late, the money lender system would include it on your credit report. By the time you receive a third letter or notification reminding you of your loan balance, your credit limit will already have dropped significantly.
For you to always get a loan and improve your scores, you should always pay in time and in full. Paying in full shows your commitment and seriousness. If you will not be able to pay in time, it is good to notify the lender pretty earlier in advance. The lender may provide you with the best advice on alternative payment scheme or method.
5. Never default or fail to pay your loans
Failure to pay your loans will cause tremendous damage on your credit worthiness. This will automatically reflect on your credit record. If you default on your loan, it will be very difficult to get a credit card, personal loan or home loan. If you will not be able to pay your remaining balance on time, you should talk to your money lender or bank. Notifying them is better than defaulting. If you have been paying your installments successfully, the lender will advice you on the way forward.
Improving your credit scores may take time especially if you have had a poor record. The above tips will help you increase your credit worthiness and make it possible for you to access a loan.