There are Bureaus which work as credit agencies and are authorised by the Reserve Bank of India (RBI) to provide credit scores. The score provided by the bureaus, is a number that denotes whether you are creditworthy. This score is based on your credit history— timely payment, low credit utilisation ratio, etc. Your bureau score influences a bank’s approval of your personal loan. This is because a personal loan is essentially an unsecured loan which directly translates to more risk for banks. If you have a good Bureau score, that would indicate that you are responsible for repayment of loans.
Bureau scores range between 300 to 900; 300 being the lowest possible score and 900, the highest. To qualify for a personal loan, a Bureau score of 750 and above is advised. This score connotes a positive impression to banks as it is a result of good payment history.
Ensuring that you have a high Bureau score increases your chances of availing a personal loan and maintaining a score of 750 and above can be easily achievable. Here are a few tips you can use to maintain a high Bureau score:
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- Don’t Just Pay the Minimum Balance
It is not advisable to just keep your head above water by paying the minimum amount on your monthly dues. On paying the minimum amount, you will have to pay heavy interest on the remaining balance. For this reason, you should make the full payment every month to not let it spill over to the next month.
- Pay Off Small Debts
Small balances are often taken for granted. It is advisable that you pay off your small debts as it leaves a positive record on your credit report.
- Timely Payment
Punctuality can take you a long way in the banking industry. A common mistake that most individuals make is the untimely payment of credit card dues. Nowadays, banks offer standing instructions so that the payment is made automatically and in a timely manner. Have your bills paid automatically with Standard Chartered’s AutoPay!
- Spend Wisely
With great power comes great responsibility and when it comes to credit card usage, discipline is key. You must make sure that you do not exhaust your credit card limit. In fact, it is advised that you limit your spending to not more than 30% of your credit card limit.
- Check Your Credit Report
Assuming that your credit report is always accurate can be quite dangerous. There are chances that the report might have incorrect information. You must scrutinise your credit report and check for errors, omissions or fraud. Monitoring your Bureau score regularly, helps you affirm your credit status. This will give you an idea as to where you stand and will also influence your credit utilisation.
Ideally, you require a minimum of 750 to qualify for a personal loan. However, there is still a glimmer of hope if you do not meet this requirement. Let us look at two ranges of score below 750.
- Between 300–599
If your Bureau score is between 300 and 599, you will not qualify for a personal loan. It gives an impression to banks that you have the propensity to not pay your dues on time. In such a case, you must take measures to gain a healthy score.
- Between 600–749
If your Bureau score is between 600 and 749, you might qualify for some banks. Other factors like your employment stability, monthly salary, other liabilities, etc., play an important role when you have a relatively low score to have your loan approved. However, you must take steps to improve your Bureau score to qualify for personal loans easily.
A basic, yet important factor like having a good Bureau score should not be overlooked as it plays an integral role in qualifying for a personal loan. There is no reason to panic if you do not have a good Bureau score as it is not very difficult to improve it.
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