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Repay your loans on time
If you are looking to take a loan, your credit history and credit score will be the checked by the financial institutions. If you have a bad credit score, your loan application will either get rejected or you will have to pay higher interest than an individual who has a better credit score. But all is not lost. You can improve your credit score. To begin with, if you have taken loans or used your credit card and have not been making repayments on time, it will have a negative impact on your credit score. Ideally, start paying your loans and credit card bills on time. Start by paying of the most expensive loan first.
Credit with a healthy mix
If you have loans, your unsecured loans will weigh lower than your secured loans. This is because financial institutions are more comfortable with secured loans. Also when you take a loan, don’t overexpose yourself. For instance, ideally, your overall loan servicing amount should not be more than 40% of your income. Also, if you have a credit card, don’t use the entire credit limit. A credit utilisation of around 30%-40% will be a positive for your credit score. However, it doesn’t mean that you don’t use the credit card at all. Not using your credit card can also give you a negative score.
Reduce credit inquiries
With technology, financial institutions get to know how many times you have called up the bank for loans or credit cards. Multiple inquires of loans indicate you are desperately in need of money. If you come across as a credit hungry person, the lender will consider you a risky customer and avoid giving loans to you. It would be prudent to do your research online before opting for multiple inquires with multiple lenders. Financial institutions will also check your income, job profile and location. Using alternative credit information, banks can also check your spending pattern to understand repayment ability.
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