Applying for a Personal Loan? Know How Applying for Loans Impacts Your Credit Score
2 January, 2025
Synopsis
- A Personal Loan may improve your credit score if you manage it effectively.
- Make sure you pay the loan EMIs on time and avoid defaulting.
- You can have multiple loans at a time, however, you must ensure you repay the loans on time.
Credit score is a grade on a financial report card. When it comes to unsecured loans like Personal Loans, lenders typically use the credit score, along with income and employment stability, to check if you should be given a loan. The credit score ranges from 300 to 900, and a score above 700 is considered to be ideal. In this article, you can get information on how taking loan can impact credit score.
Factors Affecting Credit Score
Your credit score is impacted by the following:
Timely payments of loans and Credit Card bill impacts the credit score.
Credit utilisation ratio is the total credit limit and how much amount is owed. The less credit is used, the better the credit score.
Any outstanding debt or unpaid dues is reflected in the credit report.
Multiple credit applications result in hard inquiries. These inquiries negatively impact the credit score.
How a Personal Loan Can Positively Impact Credit Score
While applying for a loan, a credit score plays an important role. If the credit score is higher, the loan may be approved faster, and the interest rates could be potentially favourable:
A loan can improve the credit history, if it is repaid promptly.
Timely repayment of the loans boosts the credit score, indicating to the lender that the borrower is responsible.
Managing and maintaining multiple loans shows skills and financial knowledge
Apply for Xpress Personal Loans from HDFC Bank
A Personal Loan can help you improve your credit score if you manage it effectively. With HDFC Bank, you can get access to Personal Loans of up to ₹40 Lakh, flexible loan tenures ranging from 12 to 60 months and attractive interest rates.
To know more about how loans can impact your credit score, connect with HDFC Bank Xpress Personal Loans.
Frequently Asked Questions
Do multiple loans affect credit score?
Yes, multiple loans tend to lower the credit score due to hard inquiries and higher debt. However, the long-term effect depends on how well the loans are managed.
Do all loans show up on your credit report?
All loans do not show up on the credit report. Loans from private lenders are not shown in the credit report.
Does Personal Loan affect credit score?
A Personal Loan affects credit score. Depending on how the loan is managed, this can be positive or negative.
Is it ok to have more than one loan?
As long as you can manage the loans effectively, it is absolutely okay to have more than one loan at one time.
Apply for Xpress Personal Loan
*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Personal Loan at the sole discretion of HDFC Bank Limited. Loan disbursal is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.
