Lenders take various factors into consideration before approving a loan application whether the application is for a business loan or a personal loan apart from doing CIBIL score check. Lenders have set different minimum CIBIL scores for personal loans and business loans. In general, if you have a strong credit history, all lenders might approve your applications.
Whether it is about personal or business loans, it is important to maintain good a credit score and timely check credit score to ensure no inaccuracies are there. Not only it improves your financial habits for the future but in some circumstances, this can also provide you the ability to negotiate for a reduced interest rate on a personal loan or business loan. Irrespective it is personal and business credit scores, to have your loan application approved, you must keep your credit score between 700 and 900, though. But, how exactly can I improve it?
How to boost your personal credit score?
For people who need a loan, a CIBIL score of less than 750 can be a burden. Here are the proven tips you need to follow to have your personal loan approved.
Aim to Keep a Balanced Credit Mix: It is generally ideal to have a healthy balance between secured loans, such as auto loans, and unsecured loans, like credit cards and personal loans. Lenders favor borrowers with more secured loans, and credit reporting agencies likewise favor those borrowers with high credit scores. Try prepaying your unsecured loans if you have more of them than secured ones and check credit score before submitting the application.
Ask for higher credit limits: Your overall credit utilization immediately decreases when your credit limit increases while your balance stays the same, which might help you build a better score when you do CIBIL score check. You have a good chance of receiving a bigger limit if your income has increased or been consistent in paying your dues.
Automate your credit payments: Sign up for automated payments for all of your credit accounts because timely payments to lenders’ accounts represent 35% of your FICO score. The majority of lenders let you set up automatic payments using your bank account information.
Change the due dates: You don’t have to accept a deadline that conflicts with your paycheck. Most due dates can be adjusted with a quick phone call and will be in effect from the next due date.
Aim for a credit utilization ratio of 30%: Pay off your credit cards in full each month if at all possible. If that’s not possible, try to keep your balance on each card at no more than 30% of your credit limit. For lenders, a credit utilization ratio of under 30% across all cards is a sign that you are using credit wisely.
Applying for a new credit very frequently: Are you one of those who keeps a track of credit card discounts? You will eventually get caught up for signing up for too many discounts. Your FICO score decreases slightly each time you open a new account. Therefore, only open a new card when it is truly necessary.
Ask for higher credit limits: Your overall credit utilization immediately decreases when your credit limit increases while your balance stays the same, which might help you build a better score when you do CIBIL score check. You have a good chance of receiving a bigger limit if your income has increased or been consistent in paying your dues.
Advice for Improving Your Business Score
Create credit lines with suppliers and vendors: Business credit ratings require data and need at least four vendors to produce their reports. Spend effort cultivating relationships with vendors to get them to agree to sell to you on a 30- or 60-day credit basis. Regardless of how small a vendor is, they could later serve as a trade reference for your company when you apply for a loan.
Make payments on time: Pay back the favor by consistently making timely payments to those suppliers and providers. You may establish a strong payment history by doing this. Additionally, it will increase their propensity to report your payment to such companies and individuals.
Does a personal credit score required for business loan approval?
Although personal and business credit scores are closely tied, there are some situations where lenders will check credit score (personal credit score) before authorizing a business loan. If your company comes under the MSME category, your personal credit score will be taken into account. It will also be taken into account if your company has a limited credit history, or if you are a sole proprietor, and if you are a self-employed person.
How does your business credit score works?
Equifax and TransUnion, Canada’s national credit reporting companies, compute personal credit scores in significantly different methods. Because each credit bureau uses a separate set of scoring algorithms, you might notice that each bureau reports a different personal credit score. However, generally speaking, the following are the primary variables considered when determining you check credit score:
- Financial history
- Comparison of available and used credit
- Public records pertaining to credit
- Credit checks
The ultimate calculation depends on a lot of things, such as whether you pay your bills on time (namely within agreed time frames). It also includes trade references, bankruptcy filings, and judgements made in the name of your company. Your credit score may suffer as a result of this whenever you check credit score. This is why it is so important that you regularly check your credit score. Knowing this will help you identify mistakes, prevent future blunders, and put measures in place to improve the standing of your company.
What you should remember
Your credit history is impacted by how long you have had each card and each loan. Your credit history could be significantly reduced by canceling your oldest account, which would be bad for your credit score when you do a CIBIL score check.
Every year, request a credit report. Your credit history is used by lenders to assess your creditworthiness. As a result, it’s essential to confirm the accuracy of your credit report. Make sure that all of your personal information, such as your mailing address, and listed accounts, are accurate, and if it isn’t, dispute any discrepancies with the credit agencies.
To sum up
Maintaining a strong credit score and doing CIBIL score check is crucial for both individuals and organizations since it affects more than just loan eligibility. Your company and personal credit scores help lenders assess your creditworthiness and provide a quick summary of your credit habits. Therefore, it is important to diligently maintain both scores. Additionally, if your business credit score falls short of the acceptable level, a strong personal credit score can assist you in obtaining a business loan.
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