Budgeting Tips That Can Help You Improve Your Credit Score In 2022
Careful budgeting can help you avoid missing bill payments, which can help improve your credit & boost your overall financial health. Read to know more!
Loans offer individuals the ability to raise adequate capital and repay the loan through flexible repayment terms. However, lenders have set an eligibility criterion for availing of a loan, with a credit score as one of the most significant factors. If you want to increase your credit score to fulfill the eligibility criteria, this blog will help you create a budget to improve your credit score.
What Is A Credit Score?
The credit score, also called the CIBIL score, is a three-digit evaluation out of 900 that helps the lender check the borrower's creditworthiness before sanctioning the loan.
Lenders evaluate credit scores to ensure they mitigate the chance of default. If the credit score is low, the borrower is not financially stable and does not earn enough to make timely repayments. However, in case of a high credit score, lenders offer high loan amounts to borrowers as it indicates repayment reliability.
A specific score out of 900 as an eligibility criterion ensures that lenders can review the repayment ability of the individual and mitigate the risk of loan default. Generally, a credit score above 750 is a prerequisite to getting most loans approved by the lender.
The Logic Behind Credit Scores: How Is A Credit Report Generated?
The credit score reflects an individual's creditworthiness based on the past financial transactions the individual has made over time. When you execute a credit score check, the credit rating website analyses all the past financial transactions to generate a credit report.
The credit report accumulates the past financial history to present whether you have made timely repayments of all the past financial obligations. With every successful, timely repayment, the credit score increases, while the credit score decreases with every default. Hence, you must create a budget to help you improve your credit report and score.
Budgeting Tips That Can Help You Improve Your Credit Score
When you utilize a credit facility such as a credit card or avail of credit through loans, you are liable to repay the credit within a set loan tenure with interest. However, you may overspend if you do not have a budget, leaving you with inadequate funds to make timely repayments.
In such a case, you may default on covering your financial obligations in time, which can significantly reduce your credit score. Hence, you must have a monthly budget and adhere to it with discipline. Here are some budgeting tips to have adequate funds and improve your credit score.
• Income BifurcationWhen creating a budget, analyze all your earnings and bifurcate them in percentages for different purposes. For example, you can use budgeting principles such as the 50-30-20 rule, where you keep aside 50% of the earnings for basic needs, 30% for wants, and 20% for savings for paying off debt. Since you will have enough to repay debt, it will improve your credit score.
• Cash FlowTrack all your earnings and create a cash flow statement for the coming month. The cash flow statement directly reflects the credit report, showing your income and expenses. It will ensure you have enough cash to cover your financial obligations without default, increasing your credit score.
• AnalysisOne of the best tips for budgeting and increasing your credit score is to track and note your expenses. Once the month is over, you should analyse your spending and see if you could have avoided some of them and increased your savings to repay your debt within the tenure. You can improve your credit score by avoiding unnecessary expenses and paying off debt on time.
• Credit Score CheckTo create a sound budget and maintain your expenses constantly, check your credit score to ensure it is above 750. You can visit the websites of various credit rating agencies to check your credit score online and create a budget around your current credit score.
Avail Of Ideal Loans With IIFL Finance
You must always have enough cash to repay your financial obligations, as it directly affects the credit report and the credit score. With a good credit score, you can easily avail of various types of loans from quality lenders such as IIFL Finance.
IIFL Finance offers various financial services and customised and comprehensive loans up to Rs 30 lakh with a fast disbursal process online and minimal paperwork. The loans’ interest rates are attractive and affordable to ensure the repayment doesn’t create a financial burden. You can apply for the loan online or offline by visiting IIFL Finance nearest branch and verifying your KYC details.
Q.1: What is the perfect CIBIL score to get loans From IIFL Finance?
Ans: A CIBIL score above 750 out of 900 is ideal for getting loans from IIFL Finance.
Q.2: How can I do a credit score check online?
Ans: You can generate a credit report and do a credit report check online by visiting the website of various licensed credit rating agencies. The first credit score check is free of cost.
Q.2: How to get loans with an average credit score?
Ans: Start by improving your credit score. However, if you need immediate capital, you can find a guarantor or provide collateral to the lenders.