In the last blog, we discussed about how peer-to-peer lending platforms like FinancePeer helps in getting the loan inspite of having a bad credit score/ no credit score. Having a bad credit score is not advice able because your loan won’t be approved by the banks. If you have a bad credit score and yet want a loan in case of emergency, peer-to-peer lending platform will help you with getting a loan. Different factors are taken into consideration like demographics, socio-economic behavior, education, connects, financial statements etc. So isn’t it better to keep your credit score good? Or if you have a bad credit score, you should probably increase it. In this blog, we discuss on how to increase the credit score.
Important factors affecting the credit score are / Key points that help you increase the credit score:
One the major factor that contributes in low credit score is late payments. If your outstanding amount is continuously on the higher part, your credit rating is highly affected by that. In order to increase your credit score, make sure that all the payments are done before the due date.
- Credit Utilization Ratio: Credit Utilization Ratio plays a vital role in affecting your credit score. Your credit utilization rate is calculated by dividing your total credit card balances by your total available credit (credit limit). Different ways to have a good credit utilization ratios are:
- Spend only on what you can repay by the billing cycle
- Close all undesirable credit cards and try to keep only one or two cards if possible.
- Use cards/card where your payment track record is good. It will help to pull your credit score
2. Payment history: Like i mentioned, the payment history should be clean. All the payments should be done on time. The major reason for this is when a lender asks for borrower’s credit score, he wants to check if the borrower will be able to repay the loan amount bank. The payment predictor will help the lender to know the borrower’s credibility. Therefore, not only pay the loans on time but bills like – electricity, credit card, phone bills, rent etc. Make sure you make the payments before time. If you are not able to remember the dates, you can keep alerts and reminders.
3. Pay all the EMIs on time: ALL THE EMIS SHOULD BE PAID ON TIME. If there is any delay on paying the EMIs, it will directly affect your credit score. Again, you can keep reminders and alerts to keep on reminding you.
4. Avoid high utilization of credit limit: Increased utilization of credit limits of your credit card may not affect credit score directly, however if your outstanding amount is continuously on higher side, then it can impact negatively on your credit score. It is always advised to use your credit card smartly and pay your all dues continuously and on time. As your loan burden reduces, your CIBIL score increases.
TO sum it up, following points should be taken into consideration:
- Apply for and open new credit accounts only as needed
- Don’t open a lot of new accounts too rapidly
- Keep a continuous check on your reports
- Reduce the number of unsecured loans like personal loans
- Guard against theft by regularly checking your credit report and closely monitoring all your credit accounts
- keep the balances low on your credit card
How long does it take to to rebuilt the credit score:
If you have negative information on your credit report, such as late payments or too many inquiries, you should pay is ASAP and wait. With time, you can improve the score. Time taken to rebuilt the credit score generally depends on the kind of reasons behind it. It’s mostly takes 7 years to rebuilt a good credit score but in some cases like bankruptcies it may take upto 10 years.
If you have an emergency of borrowing loan then an alternative to this is to switch to peer-to-peer lending companies like FinancePeer which help the borrowers with weak credit profile to get loans at very competitive rates. Therefore, even if your credit rating is weak, you can borrow at Financepeer. To know more about how to increase a bad/no credit score for a personal loan, click here or connect with us firstname.lastname@example.org.