Does a Personal Loan Affect Your Credit ScoreWho doesn’t need extra money, whether in the form of savings or a personal loan! If you know to manage the funds correctly, nothing can stop you from achieving your goals. Nowadays, most people do all monetary transactions online. Hence, it is necessary to be cautious about maintaining a good credit score. Taking a personal loan doesn’t affect your credit score; it gets affected when you do not pay the EMIs on time. No doubt, there is always a grace period to pay the instalments, ensure you pay the EMIs timely and pay off the loan completely. Otherwise, delay or negligence in loan repayment can adversely affect your credit score.
On the other hand, making timely online personal loan payment will boost up your overall credit history. Not only personal loan, but any other loans can also hurt your credit score if the payment is delayed and inconsistent. Any delayed payment can hit your credit score badly. Your credit score may fluctuate as per your payment behaviour.
When Can a Personal Loan Affect your Credit Score?
A personal loan debited via credit cards or borrowed from a financial institution can affect your credit score in many ways. It all depends on your lender. Here are the factors affecting your credit score:
- Applying for a personal loan: This can activate a stringent credit check. You will be considered for a personal loan if your credit history is good.
- Neglecting a loan repayment pattern: A borrower is liable to pay a certain amount of instalment at a fixed date, every month. As per credit bureau guidelines, a month’s negligence in your personal loan payment can reduce your credit score by 100 points.
- Unpaid dues: Any kind of outstanding payments can have an impact on your credit history. It is advisable to clear your dues even with a small amount if any.
- Paying only the minimum outstanding balance: If you only focus on clearing the minimum outstanding balance, the instalment will never get cleared on time. Constant delay in paying the dues can make you a victim of the debt trap. So, it is advisable to pay your full credit card bills on the fixed date and time.
- Acquiring Different Loans: It is necessary to maintain a healthy balance of secured and unsecured loans. Home loans and personal loans are a few examples of secured and unsecured loans, respectively. If you procure only one type of credit, it can affect your credit score.
- Closing credit card accounts: Avoid terminating old credit cards, as it is a great way to increase your credit history with a high score. Once you close your old credit cards, you end up losing a long credit history linked with it. Therefore, if you have used the card for several years, it is suggested to keep it open and pick to close the new credit card.
How Can You Improve your Credit History by Availing Personal Loan?
Manage your financial image, whether opting for a home loan, personal loan or any other credit. Timely loan payments are essential to maintain a stable credit score.
An instant personal loan taken for debt consolidation can reduce credit utilization and improve your credit history. Another significant feature of an instant personal loan includes the automated repayment facility. There is no scope of delay or missing the EMI as the amount will be auto-debited from your account on a set date.
Download SimplyCash, the latest instant personal loan app introduced by a recognized financial firm in India, HeroFinCorp! Avail instant loan ranging from 50,000 to 1.5 lakh and increase your credit score. The app is easy to use and approves loan with paperless documentation.
Therefore, before applying for a personal loan or any other loans, check credit score and maintain a good repayment history.