Many people opt for a pre-owned car to realise their dream of owning a premium sedan. Hero FinCorp simplifies this process by offering Used Car Loans, allowing you to purchase a second-hand car with ease. In India, you can borrow up to 90% of the car's value with a Used Car Loan. However, lending institutions will assess your credit score as a key factor before approving your application.
Let's explore the significance of credit score for a Used Car Loan and learn how to improve it.
How Exactly Does Credit Score Affect the Ability to Take Loans?
The credit score is a 3-digit number that credit bureaus calculate based on the report your finance provider sends them. While the score may range from 300 to 900, the closer you are to 900, the better your loan eligibility will be. That is because a decent credit rating indicates your responsible behaviour towards credit, ensuring a solid history of timely repayment.
On the other hand, lenders take a low credit score as a red flag for your loan application. Lending institutions hesitate to extend loans to those with low credit scores. Even if they approve your loan application, they may lend a smaller amount and charge you a higher interest rate than usual.
10 Steps to Improve Your Credit Score for Used Car Loan
Having a good credit score can streamline your loan application process. Moreover, you can obtain the required funding at a lower Used Car Loan interest rate.
Here are a few steps to improve your credit score for Used Car Loan:
Check Your Credit Report
The first step is to obtain a copy of your credit report. Checking your credit score will help you determine your current position. Review the report carefully to identify any errors and report them to the bureau for correction.
Pay Your Bills on Time
Repayment history is the most important factor impacting your credit score. Pay your current loan EMIs and credit card bills on time to build a decent credit score. Choose a tenure with affordable EMIs and set up automatic deductions to avoid missing the payments.
Reduce Your Credit Card Balances
Credit cards are popular lines of credit that allow you to make big-ticket expenses on credit and repay them in monthly bills. However, you must use your credit limit only according to your repayment capacity. A high credit card balance makes repayment difficult, which negatively impacts your credit score. Maintain a credit utilisation ratio below 40% to boost your credit score.
Avoid Opening New Credit Accounts
Many credit accounts in your name indicate credit-hungry behaviour, which eventually reduces your credit score. Borrow money only when necessary and repay it in a timely manner.
Maintain a Mix of Credit Types
Diversify your credit portfolio with different types of credit lines, including Personal Loans, secured loans, credit cards, etc. A diverse profile shows you can handle different credit accounts responsibly, positively impacting your credit score.
Pay Off Outstanding Debts
If you have several debts or loans with outstanding balances, try to pay them off within time. A paid account is good for your credit history.
Limit Hard Inquiries
Whenever you apply for a loan, the lending institution pulls a hard inquiry on your credit report, which reduces your credit score by a few points. Multiple hard enquiries significantly impact your credit rating, affecting your Used Car Loan eligibility. So, limit hard enquiries to maintain a decent credit score for a car loan.
Keep Older Credit Accounts Open
The age of your credit history is important for your credit score. To maximise the age and credit limit of your credit accounts, retain old and well-managed credit accounts.
Use a Secured Credit Card
You can obtain a secured credit card against the balance in your account or a fixed deposit. Those who do not qualify for regular credit cards find it easier to get a secured card due to the lower risk for the card provider. Use this card responsibly and pay its bills on time to improve your credit score for Used Car Loan.
Monitor your progress with continuous Credit Score checks
While trying to improve your credit score for a Used Car Loan, check your score from time to time to see the results of your efforts. A steady improvement indicates that you are trying in the right direction and will soon achieve your goal.
How a Good Credit Score Can Help You Get Better Rates on a Used Car Loan?
- Prompt loan approval
- Higher loan amount - up to Rs 50 Lakh
- Maximum LTV ratio
- Competitive Used Car Loan interest rate
- Relaxed loan terms and conditions
How To Apply for a Used Car Loan Online?
Have you improved your credit score for a car loan? Follow these steps to apply for a Used Car Loan online at the Hero FinCorp website:
- Visit the 'Used Car Loan' page.
- Use the online EMI calculator to calculate your EMIs.
- Click 'Apply Now' to enter a few necessary details.
- Submit the application.
- Once the loan is approved, get the loan disbursed into your bank account in a short time.
Conclusion
As you take the above steps to improve your credit score for Used Car Loan, Hero FinCorp is always there to provide you with the required funding. Once you achieve a decent credit score, you become eligible for a Used Car Loan at competitive interest rates and flexible repayment terms catering to your needs.
