How to Improve Credit Score through Personal Loan & Credit Card?

One of the most crucial eligibility parameters that lenders consider before approving loan applications is the CIBIL score. This three-digit numerical code represents your credit worthiness, and depicts whether you are a risky-free borrower or not.

In this regard, a CIBIL score of 750 or more can help you obtain personal financing conveniently and at affordable rates. However, if you do not have a healthy CIBIL score, you can boost it through a personal loan or credit card.

To know how does personal loan affect CIBIL score, read through the following sections

There are several benefits of taking a personal loan or a credit card to boost CIBIL score. Find about them below:

• Pay off existing loans

If you have not paid your past dues and have frequently missed instalments, the penal interest, as well as the interest on the credit card or unpaid loan, will be high. Obtaining a personal loan at low interest can help you in such a situation, as it will aid you in paying off your debts and eventually increasing your CIBIL score.

• Debt consolidation

Apart from the above-mentioned point, you can consolidate your debts with a single personal loan. This will lower the interest you pay on your loans and ensure that your repayment is hassle-free via EMIs of the personal loan.

If you are wondering “how does personal loan affect credit score?” then you must know that, in the short-term a personal loan can pull your credit score down. However, if you make regular EMI repayments, you do not need to worry, as this will eventually increase your score.

Note that defaulting on your loan repayment can significantly hamper your CIBIL score.

To know does personal loan affect CIBIL score, you must note down a few personal loan habits that can impact your credit score negatively:

1. Hard inquiries

When a lender runs an inquiry on your  CIBIL score, it is called a hard inquiry. Subsequent hard inquiries can have a negative impact on your credit score, though slightly.

2. Taking too many debts at the same time

Applying or obtaining too many debts at the same time depicts your credit hungry behaviour and shows that you might not repay your debts on time. This negatively hampers your CIBIL score.

Indeed, paying off your loan answers all your doubts regarding “does personal loan affect CIBIL score.” Note that when you pay your loan on time, you boost your repayment history. This boosts your credit score.