Chintamani has been tensed since the RBI decided to increase the repo rate from 6.25% to 6.50%. His credit score has been falling. He is worried about passing the personal loan eligibility criteria and that he might not get an instant personal loan at a lower rate of interest. Recently he found out that his credit card usage is to blame for his falling credit score. Since his credit utilization ratio is high, it has affected his credibility. In general, your credit utilization ratio should be low.
He now comes to Ruloans to discuss about availing an instant personal loan. Our representative then has this dialogue with Chintamani;
Ruloans: Hello Chintamani, what brings you today to Ruloans?
Chintamani: I am worried. I don’t think I will ever get an instant personal loan at a lower rate of interest!!
Ruloans: Why do you say so Chintamani?
Chintamani: Recently I found out that my credit reliability has been reducing. I haven’t slept well since getting that news.
Ruloans: Chintamani you need to stop getting worried. Let me check your report.
Our representative first checks his personal loan eligibility. After reading and understanding his case, he gives Chintamani the shocking news.
Ruloans: Chintamani, I have noticed that you have been using your credit card a lot since the past year.
Chintamani: Yes, there was a lot of schooling expenses which came up last minute. Also, my wife had to be admitted to the hospital due to back pain. It cost me some extra funds and hence I swiped my credit card for more than 6 months in the hospital care.
Chintamani: I have paid all my bills on time and have never defaulted. So why has this impacted my credit score?
Ruloans: It’s simple Chintamani. Let me explain.
Ruloans: Your credit utilization ratio is the credit amount you use against the credit limit that has been provided to you. That means if you have a limit of 1 lakh rupees and you used 20,000 in a month, then your credit utilization ratio would be 20%.
Chintamani: Oh. Alright. Then what is the problem? I still cannot understand!!!
Ruloans: Chintamani, a credit utilization ratio is considered as good when it is below 35%. Lower the ratio, better it impacts your credit score.
Ruloans: Your credit utilization ratio has been over 50% since the past 1 year. Even though you have paid all your bills on time, this high ratio shows that you are very dependent on credit. This affects your credibility, personal loan eligibility and hence banks will give you an instant personal loan at a higher interest rate.
Chintamani: Oh my god. I didn’t know that the impact would be such. I’m in trouble.
Ruloans: Chintamani, don’t worry. Remember with Ruloans you will always get the best solution. We are here to help you borrow right.
Chintamani: Yes Sir, please help me. I need this loan within the next 12 months.
Ruloans: Chintamani, If you carefully follow our plan, you can improve your credit score within the next 12 months and get a good deal on the instant personal loan.
Chintamani: Wow. Is it? Please tell me more about this. I’ll do anything to make things right.
Ruloans: Don’t worry. You can begin with reducing your credit utilization ratio. If you can reduce it below 25%, this will improve your credit score within the next 12 months. This will also help in improving your personal loan eligibility to a better level. Also simultaneously talk to your bank and increase your credit limit. This can help you lower your utilization ratio.
Also, plan a small savings corpus and keep some money there each month. This is to ensure you have enough money during emergencies. Execute this plan for a year and you’ll be fine.
Chintamani: Oh my god. Thank you so much. I will surely follow all of the advice you gave me. I shall ensure to lower my credit utilization ratio and also maintain good savings.
Like Chintamani, you too must give more focus on your credit utilization ratio. Use the credit card and keep the credit utilization ratio below 30%. Pay off your bills on time without defaulting even once. If you do this, your credibility will be high, your personal loan eligibility will improve and banks will show more confidence when they give you an instant personal loan. You might also be able to ask them to waive off processing charges and other fees.
If you need any more advice as such on loans, please do no hesitate to contact us. To apply for an Quick personal loan.
