Responsible borrowing goes beyond loans and includes credit cards and other financial products. As Indians navigate the ever-evolving financial landscape, it is crucial to recognise the key factors to consider while applying for loan products.
By carefully selecting what’s suitable, safeguarding your credit profile, and actively building a high credit score, you can steer clear of pitfalls that can pull down your score, which in turn can affect your financial goals.
Select the right loan product
The emergence of fintech and a surfeit of credit products have provided borrowers with a wide range of choices to meet their diverse demands. Leveraging data analytics, financial institutions now identify potential customers for pre-approved loans, instant credit at the point of sale, salary advance, and other services, enabling borrowers to access credit easily.
By carefully selecting the appropriate loan product and ensuring timely repayment, borrowers can enhance their credit score, opening the door to better deals and lower interest rates.
Safeguard your credit profile from identity theft and fraud
Protecting your credit portfolio from identity theft and fraud is of paramount importance, since it will not only harm your credit score but also compromise your overall creditworthiness. Lenders perceive a low credit score as a red flag, reducing the likelihood of loan approval.
Regularly reviewing your credit reports and promptly addressing any discrepancy is vital.
Rebuild your credit score before seeking a new loan
Prior to seeking a new loan, it is highly recommended that you check your credit score. Understanding your credit history is a critical step in making informed decisions about new credit.
A low credit score can lead to higher interest rates and loan rejections, while a high score can result in better loan schemes, lower interest rates, and access to new and innovative lending products. You can access your credit score from credit bureaus through various channels like their website or even WhatsApp.
Avoid multiple loan applications in a short span
It is prudent to avoid applying for multiple loans in a short span of time. Such actions may raise concerns among lenders regarding excessive reliance on credit, and hence, higher risk. This may impact your credit profile, reducing your chances of getting the loan, while losing out on the benefit of competitive pricing. Therefore, carefully evaluating your needs and refraining from making such loan applications helps maintain a favourable credit position.
In conclusion, it is essential to prioritise long-term financial well-being. Building a financially secure future requires careful planning and ongoing commitment, just like the effort needed to maintain a good credit score. By adhering to these principles and considering the factors highlighted, you can lay the foundation for a prosperous financial journey and serve as an example to others.