It is the myth that having more loans means you will have a lower credit score, it’s not true. In some cases, the opposite is actually true. Getting a new loan can actually upgrade your credit score. Credit scores are not based on what is indebted, they measure how likely you are to pay it all back.
But a personal loan can affect your credit score in both good and bad ways. A personal loan is not bad for your credit score, but it may affect your overall score for the short term. On the other hand, paying off a personal loan in a timely manner should boost your overall score. When you have a good credit score, the broker will likely consider you to be responsible with credit, so you may qualify for better terms. On the other end, the lower your credit score, the less likely you are to be seen as creditworthy and approved for a low-interest personal loan.
What Credit Score Is Needed for a Personal Loan?
Credit scores range between 300 and 850. The higher your credit score, the more will be the chances of your loan getting approved. While each has its own criteria. In general, scores above 670 indicates that you are creditworthy.
Impact of Personal Loan on Other Credit Score Factors
Using a personal loan is a better option than using your credit cards for credit rating. This is because taking personal loans online or offline helps in reducing the ratio of credit. There are many other factors such as credit history length and credit. In short, taking a personal loan can actually help you improve 90% of the factors used by credit bureaus for calculating your credit score.
A personal loan will cause a slight hit to your credit score in the short term, but making payments on time will boost it back up and can help build your credit. One should always repay the loan on time.
Your credit score will be hurt if you pay a loan late. And don't forget that a personal loan may also reduce your borrowing power for other lines of credit. If you've freshly taken a personal loan and accidentally made multiple late payments, one of the best credit repair companies might be able to remove the negative marks on your credit report.
With a good credit score, there are different kinds of small Personal Loans that you can avail from the Vijaya Bank personal loan. Whether you require funds for renovating your home or for taking the vacation of your dreams, a good credit profile makes borrowing extremely easy. Before you apply for a loan, you can check your loan eligibility and get to know more about your approximate EMI schedule with a Personal Loan EMI Calculator.
Also Read:- Personal Loan for Repairs of Machines
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