Can a Digital Loan Improve Your Credit Score?

Financial management is crucial, and for that purpose, you need to track your credit score through a trustworthy credit score app and ensure that you have an average credit score. Thus, it is better to have a perfect credit score of 750 or more, but at all times, you should avoid a bad credit score of 400 or less.

What Is A Good Credit Score?

CIBIL or the Credit Information Bureau (India) Limited gives individuals credit scores, ranging from 300 to 900. If your score is 685 or above, you are eligible for loans. Lending institutions check the CIBIL score before approving a loan because it shows the bank or lender how well an individual manages their credit amount. 

Taking loans and repaying them on time will increase the credit score. On the other hand, taking loans and incurring debt will lower your credit score. CIBIL divides the score range into three categories, which are:

Perfect credit score: Ranges from 750-900. You can access fair interest rates and often high loan amounts if your credit score is within this range.

Average credit score: Ranges from 500 to 749. If your score is in this category, you must have a guarantor. However, if your score is above 650, you can get decent loans, but the interest rate might be high.

Bad credit score: If your credit score range is between 300 and 499, you are in the worst range. With this range, getting a loan would be almost impossible, and even if you get a loan, it will have a very high interest rate. 

The Importance of Digital Loans 

Digital lending has entered the financial market through apps and revolutionized the borrowing platform for borrowers and lenders. You can now get instant approval for digital loans with fewer hassles and less paperwork.

Often, some people lack a credit history. If you are one of them, stop fretting. Digital lending websites use non-traditional data sources to check your creditworthiness, including several parameters like internet usage, social media, and browsing data. 

Thus, with the digital platform opening new avenues for new borrowers without significant credit history, people are getting more inclined to apply for loans online because they can now create a credit history that can benefit them when they borrow later.

Moreover, digital loans have the advantage of quick and constant checks. They constantly alert you when your payment is due, thus helping you develop a creditworthy behavior and maintain a good credit score. 

Moreover, digital loans are a step towards financial inclusion as they allow hassle-free borrowing for individuals. People tired of paperwork and running to lending organizations can now comfortably apply for loans with minimal effort.

Conclusion

Credit or taking money from another source to meet your expenses might not sound like a good idea. However, in the financial system, having credit is nothing to be ashamed of as long as you meet the terms and conditions of timely repayment. Therefore, you must pay off your digital personal loans to increase your credit score, which, in turn, will increase your creditworthiness to personal loan providers.