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Your credit score takes a hit every time you add to your debt; however, a good mix of debt boosts your CIBIL Score, as does timely repayment of loans. What you should also know is that lenders analyse your loan application based on your credit score and credit history. This means that maintaining a good credit score is essential for you.

People often make the mistake of assuming that certain factors affect credit score, when they do not. Factors like your age, marital status, and debit card usage play no role in deciding your credit score. Information like your income, bank balance, and employment status do not directly affect your score, although it may have an influence on your final approval.

 The factors that do affect credit score and your ability to secure a great personal loan are limited, but require individual attention. Merely finding a suitable personal loan is not enough; you will also need a respectable credit rating in order to avail it. Looking for a loan by adopting a trial-and- error approach is damaging and unproductive.

That is why it is important to follow certain guidelines to find the best personal loan without damaging your credit score.

Here's what you should do:

1. Keep An Eye on Your Credit Utilization Ratio: A personal loan of an amount that doesn't cross 40% of your debt-to- income ratio (DTI) will not negatively affect your credit score. A lower DTI shows your capability to properly balance debt and income. On the other hand, a higher DTI suggests that you have too much debt when compared to your income.

2. Get A Tentative Quote From The Loan Provider of Your Choice: If you formally apply for a loan directly, your lender will perform a 'hard' credit check, which will leave a negative mark on your credit rating. If this happens a number of times, your rating will suffer a serious setback. So, try to understand if you are eligible for a personal loan before you apply by checking the eligibility criteria and talking to the lender in person.

3. Do Not Apply For Personal Loans From Various Lenders At The Same Time: This suggests your lack of confidence in securing a loan and reflects poorly on your credit score. Instead, check your eligibility and prospective interest rate using a Personal Loan Eligibility Calculator like this one.

4. Keep Checking Your Credit Score Regularly: This will allow you to note any sudden fluctuations, and also give you a chance to improve your score if necessary. Ordinarily, 35% of your credit score depends on your payment history, 30% depends on the amount of debt you have, 15% is decided based on the length of your credit history, 10% on the number of new credit accounts you create, and 10% on the variety of credit (like credit cards and loans) you use.

5. Make Sure You Pay Your Dues on Time: If you are forced to make late payments, keep the duration to a minimum. Making payments no later than 30 days past due date is generally acceptable. This will help you opt for the loan of your choice, without having to worry about rejection. It will also have a positive impact on your credit rating.

6. Remember To Compare Lenders' Fees And Rates Details: Some financial companies offer low rates of interest but charge significant additional fees. These may include exorbitant processing fees, high prepayment penalties, random maintenance charges, and so on. This could increase your repayment burden and lead to you missing an EMI and damaging your credit score. So comparing the fees and charges levied on your personal loan is very important.

Your credit rating is one of the most important financial tools for availing the best personal loan. The right credit score is crucial when getting approved for loans and asking for the best interest rates available. And in your search for a personal loan, you need to ensure that your credit rating remains high. So make sure your loan provider offers you a simple online personal loan eligibility calculator and offers competitive interest rates along with other additional benefits. Bajaj Finserv, for instance, offers a Personal Loan that features instant approval, fastest disbursal within 24 hours, a personal line of credit, and tons of preapproved offers.

Also Read: CIBIL Score Improvement Tips

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