Credit score is essential for the lenders to assess your repayment ability during a loan process or credit card application. A low score affects your ability to easily get the approval. But a good one means you are creditworthy in the eyes of banks and other financial institutions.
In case your score is low and you are applying for a loan/credit card, you must improve the credit rating first. How do you do that for quick application approval? Identifying the metrics is key to boosting your creditworthiness. This blog outlines the factors that affect your credit score and what things to ignore.
What Positively Affects Your Credit Rating?
From controlling your expenses to clearing payments on time, here is what you should do to maintain a good credit score:
1. Reduce Card Utilisation Ratio
Limiting your expenses implies that you borrow responsibly. Splurging more every month doesn’t add to the reward points or boost your credibility. It only implies that you rely extensively on credit. Lower your card utilisation ratio and boost your credit score.
2. Pay Timely Dues
Clear your payments on time to show that you do not falter on your dues. Having a positive history of credit repayments without any missed payments helps showcase your credibility in the long run. You can also set auto-payment deductions or reminders to make sure you don’t skip on timely payments.
3. Maintain Old Accounts
One way of calculating credit scoring is the average lifeline of your credit-linked bank accounts. So, don’t discontinue a particular credit card, as it adds to your score even if you don’t use it.
4. Monitor Your Credit Score
Keep a tab on your rating to notice if it is increasing or decreasing. In case your credit score is reducing and you don’t know the reason, you can contact the bank and learn more information. Additionally, keep an eye out for suspicious activity and alert the authorities in case of any error or sign of unauthorised transactions.
5. Register to Vote
Voter registration acts as an address proof for the lenders. It might not boost your credit score but can increase your chances of getting a loan quickly.
What Negatively Affects Your Credit Rating?
While some activities can improve your credit score, these few habits can quickly reduce it:
1. Late/Missed Payments
In case you don’t clear your credit card dues or pay a loan EMI on time, it will reflect poorly on your credit report. Such misses show lenders that you are financially irresponsible.
2. Opening Multiple Accounts Quickly
If you open several bank accounts or apply for multiple loans in a short span, the lenders will assume that you are financially struggling. In that case, they will not be willing to approve your loan or credit card application.
3. Being Financially Involved with a Poor Credit Score Holder
If you have a joint account or a business with someone with a bad credit score, it will affect your creditworthiness as well. Ensure that you are either not partnering with a poor debtor or focusing on improving their score first.
4. Applying for Unsecured Loans
Nowadays, several credit lending companies are coming up, enticing you to apply for a loan. But what’s a hidden drawback is that these agencies perform a stringent background check to validate your credit score. Unfortunately, the ratings get down, regardless of whether you get a loan approval or not.
It is essential to follow positive financial practices to maintain your credit score. It can affect your ability to take a loan when the need actually arises.
What Doesn’t Affect Your Credit Rating?
Not everyone applying for a loan is financially sound, leading to several misconceptions about the credit score. Here are a few factors that absolutely have no connection to your credit rating:
1. Prior Tenants
The tenants who have lived in your house before could be millionaires or bankrupt; it wouldn’t impact your score. Lenders are solely interested in your credit score and individuals who are financially related to you. They could be your relatives or family members as well; it doesn’t make a difference.
2. Old Credit History
The credit score you had 5 to 6 years ago will not affect your credibility today. Companies analyse your creditworthiness from the recent activities. So, if you missed an EMI a decade ago, you are safe.
3. Continuously Checking Credit Score
Many believe that frequently checking your rating is a poor practice, as it can significantly impact the report. But that’s not true; there are several free tools available from which you can check the credit score stress-free.
4. Your Income or Savings
The credit report primarily shows your borrowing and payment abilities, rather than your income. Lenders may ask about your income, but solely for the purpose of deciding how much loan is realistic for you.
5. Frequent Use of Debit Card
The score focuses on your credit card, not the debit one. You can use it for as much amount and as frequently as you want, there will be no change in the report. However, remember that using a debit card for an overdraft facility can affect the score as you are practically taking a loan.
Boost Your Credit Score and Apply for a Secure Loan with TRK Finance
Once you know how to improve your credit ratings, you can slowly but effectively show yourself as a reliable borrower. Once your score reaches anywhere between 861 and 960, you can easily apply for a loan and get it approved. However, ensure that you only secure credit from a trustworthy company like TRK Finance. They offer approval on loan applications within 24 hours so you don’t have to wait. Also, our loan securing process is effortless and doesn’t require you to provide any collateral. We tend to multiple sectors, including transport & logistics, retail, education, healthcare, and automotive.
Conclusion: Secure a Loan for Your Business Today
Maintaining a strong credit score is imperative to securing a business or short-term loan. Clearing your payments on time, monitoring the score, and maintaining a low credit utilisation score are effective in strengthening the score. However, missing payments, applying for multiple loans, or being financially related to a low credit holder can significantly impact your credit score. So, make sure you take the right measures and bring your score into the good category.
Once your credit score improves, avail a loan from TRK Finance, a platform that offers safe and quick loan solutions to its customers. We offer flexible funding choices to suit your business requirements, without any hidden fees. Connect with the experts and learn more.
