Last Updated on July 22, 2023 by asifa
When you apply for loan, the lender may reject your loan application. Therefore, it is essential to improve your score before applying for a loan.
This article will explain the primary reasons you should improve your credit score.
Why is a credit score important?
A credit score depends on payment history, credit utilization, and length of credit history, and it shows your credit behavior and repayment history. Banks and lending institutions use this score to measure the applicant’s creditworthiness. If you have maintained a good credit history above 750, you can get instant loan approval at low-interest rates. You can check your free credit score using Buddy Score and get a full credit report.
5 Major Reasons Why You Should Improve Your Credit Score
The following will help you understand the benefits of a good credit score.
Interest Rate
When you have a good creditworthiness, you can negotiate the interest rates of your choice with your lenders. Therefore, you can get loans at comparatively lower interest rates by improving your score.
Loan Amount
The size of your loan amount depends on your credit. Therefore, you can apply for a higher loan amount with better deals when your score is high.
Instant Approval
Since the creditworthiness indicates your credibility, it acts as proof of creditworthiness when lenders verify your loan application. As a result, you will get instant loan approval if your score is high.
Creditworthiness
A creditworthiness is a numerical representation of your creditworthiness, and it shows your capability to repay your dues. Therefore, lenders consider you a credible borrower when you have a good score.
Co-applicant
A co-applicant is jointly responsible with the borrower for the loan and repayment of the loan amount. When you have a low score, you can get a co-applicant with a good history. Therefore, by improving your score above 750, you need not bring a co-applicant to get a personal loan.
Easy tips to improve your credit score
The following will help you understand how to improve your credit quickly.
- Make loan repayments on time.
- Review your credit report for errors at least once a year regularly. It will help you track your overall credit behavior.
- Clear your past and pending debts as much as possible
- Maintain your credit utilization ratio below 30% of your income
- Avoid multiple hard inquiries.
- Become an authorized user of an old account.
EndNote
Your credit score plays a significant role when you plan to apply for a personal loan. Monitoring your score and making timely payments can help you gradually improve your creditworthiness to get loans at competitive interest rates.
Read More: Credit Card Interest Rates: Everything You Need to Know
