CIBIL Score is one of the most important factors considered when it comes to a lender rejecting or approving your loan application. While personal loans get easy approval even on a low CIBIL score, a business loan surely needs a strong CIBIL score. A good score will help you get an instant business loan or personal loan, and that too at lower interest rates.
What Is A Good Credit Score?
There are different scoring models, and various financial companies use different ways of calculating credit scores. Generally, 670 to 740 is considered a good credit score for lending MSME loans, and 740 to 799 is regarded as an excellent score. Above this range, credit scores are considered excellent, and you can very easily request a credit loan. Now, if you want to attain a good credit score to take up a loan for your business expansion, then specific smart yet simple tips can help you improve your credit score.
Here are our best tips that can improve your credit score:
Clear Up All Your Existing Debts
When you have an outstanding debt on your account, especially if it is listed in your business loan documents, you need to clear it. Having an outstanding debt on your account negatively impacts your CIBIL score, so it is essential to clear it up as early as possible to boost your credit score. You should repay your debt within the chosen timeline or should complete the repayment before the foreclose of your loan.
Complete Your EMI Payments Timely
If you think making EMI payments is enough, then it's not if you do not make payment on time because it affects your credit score. When you complete your EMIs with delays, it gets noticed under the credit score. So the best thing to do is to fix up an auto-deduction feature in your bank account to facilitate timely payment of EMIs. This will ensure that you don't get a bounce charge, which improves your credit score.
Customize Your Credit Limit
Your credit utilization also has a huge impact on your CIBIL score. The more you are able to restrict yourself to your credit usage, the better it is for your credit score. On the other hand, when you reach the limit of your credit, it creates an opposite impact and lowers down your credit score. The best way to tackle this situation is to customize your credit limit that goes according to your expenses.
Report Discrepancies in your Credit Report
This doesn't happen usually, but occasionally there might be some discrepancies in your credit score report. What if your credit score is as low as your home loan lender has not informed CIBIL of your latest payment details. So, it is better to check your credit score on a regular basis and check for all possible discrepancies. If you spot them early, then you can get them resolved at the earliest.
Lend a mix of credit
One thing that is crucial for beginners is to understand that if you do not borrow credit, you will not have a credit score. Besides that, if you borrow only a single type of credit, then it will not increase your CIBIL score. Therefore it is essential for you to borrow multiple or a mix of credits to increase your credit score.
Opt for Long Tenure To Complete Your Loan
When you borrow or plan to borrow a loan, then do remember to choose a long tenure for the loan repayment. The reason behind this tactic is to ensure that your EMI bifurcation is low, and you will be able to complete it on time without missing any instalments. When you don't skip or delay in paying your EMIs, your credit score by default improves a lot. This is a big advantage that comes with long tenure business loans.
Curate Credit History By Choosing Different Forms Of Credit
If you have never borrowed funds in the past, then you will obviously have a credit history. As a result, your credit score will be low. In order to maintain your credit score, you need to ensure that you borrow a healthy amount of credit that is inclusive of both secured and unsecured loans.
All of these tips will help you in achieving a good credit score over time. Once you reach a very good or excellent range of credit scores, you can lend loans for your business very quickly.
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