Today, new concepts pertaining to payment technologies have emerged as new payment technologies have gained momentum. Getting instant loans online is just a matter of a few clicks. Surprisingly, ‘credit score’ is one such term that is a stranger to many.
So, what is a credit score?
Simply put- a credit score is a three-digit number. And what does that mean? It shows the probability of a borrower returning the borrowed amount to the lender. For example, if somebody borrowed a quick loan from an authorized lender as an instant personal loan and returned the amount on time with interest, the credit score would see an upside. On the other hand, their credit score will suffer if the borrower fails to return the amount on time with the interest.
Why is a credit score so important?
In today’s conflicting economic environment, it’s hard to predict when a financial emergency will knock at your door. It could be a medical emergency or any other insurmountable expense. In such instances, if you’re a low-income professional with negligible savings compared to the expense you would have to undertake, you would probably have no other option than to borrow some amount from the bank. In other words, you would have to appeal for an instant loan online.
Thanks to the times that we live in, it’s possible to avail of instant loans online from the comfort of your homes. It has eliminated the strain of standing in a long queue at the bank and assembling a mountain of paperwork to reach the first step of the application process.
Online loan options are much more straightforward, and applications are easier to complete with minimal paperwork. Additionally, a flexi loan available online may come at a lower interest rate than the conventional loan available through a bank.
So, what does credit score have to do with loans?
The credit score is a common factor that will be considered no matter what route you take to request quick loans. Ideally, you should have a credit score greater than 700, preferably closer to 750, to establish your reputation as a legitimate entity. Taking the state of the economy into consideration, it has become essential to have a good credit score to eliminate hurdles in the loan process.
How can someone improve their credit score?
Below are some tips that you can follow to improve your credit score. Bare in mind that it may take time for your credit score to restore to an acceptable level if it is drastically low.
- Paying your bills on time includes any credit you owe to the bank. If you have already taken a loan, be sure to pay the monthly installments on time and the interest amount.
- Have a lower credit utilization rate: credit utilization rate refers to the amount you use below the approved limit of your credit card. Your credit utilization ratio must be less than 40% to maintain a good credit score.
- Keep your credit card open even if it’s dormant: your history in terms of time is just as crucial as your punctuality in paying any outstanding amount. Closing a credit card may result in a lower credit score.