Tips to Boost Your Credit Score Using Personal Loans

There are many instances in life where you require financial support to meet unexpected expenses or make significant purchases. Here, an unsecured personal loan is a reliable way to get the extra funds quickly and conveniently. There are many positive points associated with taking out unsecured loans online. The first, of course, is the fact that there's no collateral required. Secondly, you can also use the loan amount to meet a wide variety of financial needs. There are no restrictions on its usage. Thirdly, the paperwork is minimal, and loan disbursal is swift (once your loan is approved, of course). The only negative point associated with an unsecured personal loan is the relatively high interest rate it carries. Since there's no collateral involved, giving out personal loans is a riskier option for your lender than it is for you. That's why lenders also look for applicants with a high credit score.

But did you also know that making timely repayments on your personal loan could boost your credit score as well? It's true. Here are four tips on how you can increase your credit score using a personal loan:

1. Don't Apply with Multiple Lenders

While it is a good (even necessary, in fact) practice to do thorough research and compare multiple personal loan offers across lenders, the same can't be said about numerous applications. You see, every time you apply for an unsecured personal loan with a particular lender, they will request access to your credit score. This is known as a 'hard inquiry', and it knocks off a few points from your credit score. Now imagine if you were to do this with three to four more lenders! You'd lose a lot of points from your credit score. It may also give out the impression that you're desperate for new credit.

2.Borrow Only What You Can Repay

If there's one thing you always need to remember while taking out unsecured loans online, it's making timely EMI payments, come what may. This is the only way you can boost your credit score. This is why you need to be sure of the loan amount you need. If you're unsure, you may over-borrow, which will make timely repayments more difficult. You must also ensure that your personal loan EMIs don't affect your ability to pay fixed monthly expenses.

3.Make Timely Repayments

Making timely repayments on your unsecured loan online is a crucial way to boost your credit score. If you cannot service your loan repayments on time, it will only bring your credit score down. In addition, timely payments show that you are a responsible borrower and give vital importance to your loan repayment.

4.Check Your Credit Report for Errors

Every time you make a payment on your personal loan, you need to make sure that the same is updated on your credit report. If it isn’t, your credit report may unnecessarily reflect a delayed payment. This will again bring your credit score down. It is better to catch errors like these in time. If you let them go unnoticed, you will have a tough time convincing an unsecured loans company to give you a personal loan in the future.

Wrap Up

The four points mentioned above are valuable tips on leveraging a personal loan and boosting your credit score. But, of course, making timely repayments is the most crucial factor, along with borrowing only what's required.


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