Does getting personal loans and credit cards really help Credit score?

A personal loan or credit card is not a difficult thing to get, as long as the individual fulfills the eligibility criteria for the same based on the company’s policy and credit score. When one compares personal loans and credit cards to housing loans or auto loans the procurement duration is much lesser and ever less cumbersome. But the question at hand is whether personal loans and credit cards help an individual’s credit score or not? If it does how does it help is the next question that needs to be answered. We already know that higher the CIBIL score getting loan applications sanctioned gets not only easier but also the interest rates are reduced.

CIBIL Score for Personal Loans

It always helped to have a financial portfolio with a both unsecured and secured loans involved affecting your CIBIL score positively. In the case of a personal loan, which is an unsecured loan loan repayment is made in installments unlike revolving debt which is the case for credit card bill payments.

Taking up a personal loan for enhancing CIBIL score may not be a great idea considering that personal loan rates are generally expensive and just in the case you have a revolving debt through credit card, it will add to your portfolio of unsecured loans. However, personal loans can be used for any purpose such as purchasing a home theatre system or funding a family vacation or paying up credit card dues. In the case of paying off credit card dues a personal loan can actually help to enhance your CIBIL score. But this sort of step needs to be taken with much caution. If you are able to take up a personal loan with a lower interest rate as compared to the interest rate charge by the credit card company, it really becomes a useful medium. But this only helps when paying dues that have accumulated and is hence reflecting as an outstanding amount in credit card bill statement. This can ensure the CIBIL score rising. It is important to avoid defaults in the personal loan repayment installments because that again can reduce your CIBIL score for personal loan unpaid status. Personal loans are pricy and have little or no value addition if you already have a good CIBIL score considering that your credit card is a non interest free allowing you to get a credit trail. Also too unsecured instruments in your financial portfolio might be harmful to credit score instead.

Tips to Enhance CIBIL Score for Credit Cards

Credit cards are are the least complicated instrument to start a credit trail. Also, on dos not need to pay interests when compared to personal loans, but under the condition that the credit card bills are paid on time.This is a good way to start a CIBIL rating. So in case you have no CIBIL rating it helps to apply for a credit card. In the case that you already have a credit card, here are steps that you can make sure that owning a credit card helps to enhance your CIBIL score.

• The most important thing to do when owning a credit card is to ensure duly bill payments, not only enhancing or keeping your CIBIL score stable but also to avoid debt.
• A CIBIL score depicts how an individual has treated their debt in the past. Hence nothing is more capable of spoiling the credit score than untimely payments or worse missing payments.
• Nothing can spoil the credit score like delayed payments or missed payments. It is understandable to have done once in a year but not at a regular basis.
• RBI has also sanctioned a three day period for grace when it comes to paying up the bills. Reports for CIBIL are updated once the this grace period is also crossed. This helps the borrower considering that people can forget or there may be a long holiday at the time causing delay in payments.
• Under circumstances where one is unable to pay the full amount, paying up the minimum amount due can also help as it would not be considered as a default and will not be reported to credit agencies. But it will definitely add to the compound interest on the remaining amount for the following month(s).
• If an individual wants to refresh their credit history it is best to make consistent payments regularly that is generally 30% of the sanctioned limit and pay them in due time.
• For people who already have a trail and only wish to enhance their score low credit utilization may be a useful instrument.
• Also make sure that you have a high credit limit if your eligibilities meet it and you can control not misusing it of course.
• It is a good idea to maintain more than one card for special card privileges such as fuel or shopping rewards, but not too many.

At the end of the day it's about timely payments and clearing of pending payments as well since it reflects your credit behavior and may affect your CIBIL score.