There are many myths related to taking a personal loan and how it will affect your credit score or your financial status. Most people believe that taking a personal loan is a task and another way to decrease your credit score. Let us clear this myth by understanding that applying for a personal loan has its own negative and positive impacts on your credit score.
However, personal loans are beneficial to every borrower as it helps in managing your finances. It’s always a good idea to choose RBI registered loan options and understand the real terms and conditions behind the impact of personal loan on credit score.
This blog clearly guides on how a personal loan on credit score works, how personal loans affect your credit score, and why choosing a right platform like RBI approved loan apps in India is necessary and how it helps in long term financial health.
Check Your Credit Score:
Maintaining a credit score is extremely important to understand about your financial health. A credit score ranges between 300 to 900, and anything above 750 is considered as a good credit score. You can check your credit score on olyv plus today.
This score is reviewed by the lender to approve your loan application. Different factors like payment history, credit utilisation, length of credit history, number of credit inquiries etc. When applying for a loan on credit score, these factors are majorly considered to understand your repayment capacity.
Does Personal Loan Affect Credit Score:
Applying for a personal loan does not directly affect your credit score. There are factors like the number of times you apply for a loan application or your repayment habits. Simply taking a loan cannot affect your credit score, it is your repayment behaviour that can affect the credit score. After applying for a loan, if you miss any EMIs or overdue your payment it can directly affect your credit score in a negative way.
It is always considered to use a personal loan instead of using a credit card to maintain a good credit score. As a higher credit card usage can cause credit utilisation factors and this can lead to a negative score in your credit health. There are other factors that include the rise of credit score which are directly connected to personal loan.
Let’s understand more factors related to how a personal loan impact credit score can happen.
Avoid Applying For New Personal Loans:
Applying for new personal loans through different lenders in a shorter period of time is a sign of bad credit score. Every time you try to apply for new loans, your credit score will drop slightly.
However, this is not a long term fall as it is temporary and you can always improve it by repaying your EMIs or debts on time. But, it is important to avoid such irresponsible behaviour.
Role Of RBI Approved Loan Apps In India:
When it comes to applying for a loan and maintaining your credit score, it is very important to apply for RBI approved loans in India. As they are transparent, verified and trustable. Applying to these loan apps prevents you from any financial stress and helps you build your credit score as well.
Benefits of choosing regulated platform include:
- Transparent interest rates
- Secure data handling
- Clear repayment terms
- Fair recovery practices
Hence, using these trusted RBI approved fintech apps reduces your risk of getting scammed and ensures that your personal loan impact on credit score is reported correctly.
Tips to Avoid Negative Credit Impact:
Here are some simple tips to avoid creating a negative impact on your credit score:
- Borrow only what you need
Over borrowing can lead to higher interest rates and charges, which cannot be repaid later. This will cause decrease in credit score
- Choose affordable EMI amounts
Always go for a lesser loan amount which will cause you less EMI amount. This will help you in managing your finances and not missing an EMI due to high amount
- Check repayment dates
Keep a track of your repayment dates and set reminders. This will help you in not missing on any payments.
- Avoid frequent loan applications
The most basic step to protect your credit score from falling down is to not apply for too many loan applications. Do proper research and choose a trusted RBI approved app to apply for a loan.
- Monitor your credit report regularly
Always check your credit report once every 2 months. To have a brief understanding on errors or incorrect loan applications.
Follow these simple habits to have a good credit score and maintain a better long term financial health.
Conclusion:
There is neither a good or bad impact of your personal loan on credit score. Its overall impact depends entirely on how responsibly you manage and repay it. When you take a personal loan and follow a structured repayment plan, it can actually help improve your credit score over time. On the other hand, missed EMIs, delayed payments, or loan defaults can negatively affect your credit profile. Therefore, understanding the impact of personal loan on credit score is extremely important, as it helps you make informed borrowing decisions and protects you from unnecessary financial stress in the future.
When you choose to apply for a loan on credit score in mind, it is essential to place strong emphasis on timely repayments, sensible borrowing, and careful financial planning. Borrow only what you genuinely need and ensure that the monthly instalments comfortably fit within your budget. Using trusted and secure platforms, such as RBI-approved loan platforms, adds an extra layer of safety and transparency to the borrowing process. These platforms follow regulatory guidelines, ensuring fair practices and data security. When used wisely, a personal loan can encourage better money management habits, build a positive repayment history, and make you more financially disciplined. Over time, this improved discipline can strengthen your creditworthiness, increase your eligibility for future loans, and help you achieve greater financial stability.
