4 Ways to Improve Your Credit Score With a Personal Credit Line
A credit score is an important metric that demonstrates an individual’s ability to repay a loan in a timely manner. The higher your credit score, the more likely you are to get approved for a loan by a lender. It is based on a borrower’s credit history and takes into consideration your repayment history, debt, and credit types, amongst other factors.
A higher credit score not only affects your loan approval but also lowers your interest rates, increases credit limits, and reduces initial deposits for rent.
If you are looking to achieve a higher credit score, but don’t know how then you are in the right place! In this blog, we go over 4 simple ways you can improve your credit score with a personal line of credit.
1. Opt For Different Types of Credit
When your credit score is being calculated, it is trying to gauge whether you would pay back the borrowed amount and do so on time. An individual whose credit history shows that they have consistently fulfilled their repayment requirements will have a higher credit score. You can showcase your creditworthiness through different forms of credit such as credit cards, personal loans, secured loans, instant loans, and personal credit lines.
When used in moderation and not together, having different types of credit in your portfolio reflects well on your credit score. You can opt for credit types that suit your needs. In an instant credit line, you can borrow money as and when you need it up to a certain extent. This makes this option perfect for unpredictable expenses or gap financing a project.
2. Optimize your Credit Utilization
Credit utilization is a ratio of how much credit you have used to the total amount of credit you have. Having a low credit utilization means you lose the opportunity to show lenders that you are capable of paying back debt. Having a high credit utilization indicates that you are borrowing and spending over your means. This tags you as a high-risk borrower as there is a greater chance you may default on the loan. It has a direct negative impact on your credit score.
The recommended credit utilization ratio is 30%. In order to hit that mark with your personal credit line, we advise you to figure out how much you expect to spend and ask for a total borrowing amount accordingly. If you find that you are in need of more money or are approaching your credit limit, you should always increase your credit limit. This will instantly lower your credit utilization ratio and raise your credit score.
3. Don’t Apply for Multiple Instant Credit Lines
If you are thinking of applying for a personal line of credit, we suggest you keep it to one instant credit line at a time. If you are in need of more money, you should increase the credit limit on your existing personal credit line rather than applying for a new one because having multiple credit lines results in multiple hard inquiries into your credit report.
A hard inquiry is a thorough look into your credit profile to assess the risk of lending to you. A note of this is made in your credit history. Having multiple hard inquiries in a short span of time can adversely impact your credit score. This can be even worse for you if your application gets rejected. So, it is best that you do not apply for multiple instant credit lines.
4. Demonstrate Low-Risk Borrower Behaviour
The algorithms that calculate credit scores are designed to pick up early signs of stress and risks in the borrower’s credit history. You should not show any signs of risk and actively try to demonstrate low-risk borrower behaviour. Make your personal credit line repayments well in advance or at least, on time. Also, do not miss any monthly payments or default on the credit line.
CASHe is a leading loan app that offers a range of financial products – instant personal loans, personal lines of credit, and Buy Now, Pay Later options. Download the app and get started on your instant credit line journey today!