CIBIL: How do personal loans affect your credit score?
CIBIL score, depending on how you manage them. It is vital to ensure that you do not miss any instalment towards repayment of loan. Defaulting on a personal loan can substantially damage your credit score.
Payment history is one of the most critical factors in determining your credit score, so any late payment will cast a shadow on the credit score. Credit utilisation: Personal loans can increase your total available credit, which can lower your credit utilisation ratio if you don’t use up all the available credit. A lower credit utilisation ratio generally reflects positively on your credit score.
Regular payments: Making timely payments on your personal loan will impact your credit score in a positive way. It shows to lenders that you are reliable and capable of managing credit responsibly. Credit history length: Taking out a personal loan can slightly bring the average age of your credit accounts lower, particularly if it’s your newest account.
As you make on-time payments and keep the account in good standing, it can contribute to your credit history in a positive way. ALSO READ: Mutual Funds: Monthly SIP of ₹4,000 in this value scheme since inception would have grown to ₹1 crore Credit mix: Having a diverse mix of credit types, including instalment loans such as personal loans, can positively affect your credit score. Banks like to see that you can handle different types of credit responsibly.
Hard inquiries: Applying for a personal loan can result in a hard inquiry on your credit report, which can lower your credit score temporarily. However, if you manage the loan well and make timely payments, the positive effects are expected to outweigh the drop caused by the inquiry. If you manage your personal loan in a
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