Can Personal Loans and Credit Cards Help Your Credit Score?
A personal loan or credit card can help meet short-term requirements during a financial crunch. However, you must fulfil the eligibility criteria to get a personal loan or credit card, including your credit score. Your credit score determines your ability to repay a loan or any other form of debt. But should you opt for a personal loan or credit card if you want to build your credit profile?
This article discusses how getting a personal loan and credit cards helps your credit score.Credit Score For Personal Loans And Credit Cards
A mix of unsecured and secured loans is healthy for your financial portfolio. However, acquiring a personal loan to improve your CIBIL score may not be the best idea as it has a higher interest rate. In the case of a revolving credit card debt, it may prove to be expensive and add to your unsecured credit portfolio.You can use a personal loan for various reasons, including purchasing a home theatre system, financing a family vacation, or paying a credit card bill. Paying off credit card dues can help improve your credit score. However, you must take such measures with extreme caution.
The most convenient way to do so is to avail of a personal loan with a lower interest rate than a credit card company. However, this will only help pay the accumulated charges, show up as an outstanding amount on your credit card statement, and increase your credit score.It is essential to avoid defaulting on personal loan repayment rates, which could lower the credit score for outstanding personal loan status. Considering personal loans are expensive, and credit cards are not interest-free, there is little to no added value if you already have a high credit score, giving you a credit trail.
Tips To Improve Your Credit Score
Credit cards can be the easiest way to create a credit trail. Unlike personal loans, you do not need to pay interest on credit cards until you clear the dues on time. Here are some tips to help beginners start their credit-building journey and improve their credit scores.• Pay credit card dues on time
• It’s a good idea to pay off just the minimum amount due to stay away from the default status on your credit cards payment
• You can keep different credit cards to avail of the benefits only if you can control the misuse
• If you want to update your credit history, it is best to make consistent payments regularly, which is 30% of the authorised limit and pay on time.
Frequently Asked Questions
Q.1: What is the ideal credit score required to avail of a personal loan?
Ans: A credit score of 750+ is good enough and can fetch you the loan terms of your choice.
Q.2: What are the things to consider when applying for a personal loan?
Ans: You must consider the loan amount, tenure, and interest rate, among other things, before applying for a loan and ensure you do not default on payments.
Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.
