How to Secure a Loan Even with a Low Credit Score: 5 Smart Habits You Must Follow

In today’s financial landscape, your credit score plays a vital role in determining your access to loans, credit cards, and favorable interest rates. A poor credit score can make it difficult to get a loan approved, and even if you do, lenders may charge higher interest rates — making home loans, car loans, or personal loans a costly burden.

However, the good news is that a low credit score doesn’t have to mean a loan rejection. With the right habits and financial discipline, you can improve your creditworthiness and increase your chances of loan approval. Here are five simple yet powerful tips to help you manage your credit health effectively.

1. Keep Your Credit Utilization Ratio Below 30%

A healthy credit utilization ratio is one of the most important factors for maintaining a strong credit score. Experts recommend keeping this ratio below 30%.

For example, if your total credit card limit is ₹1 lakh, you should aim to use no more than ₹30,000 per month. Spending beyond this limit signals to lenders that you rely heavily on credit for regular expenses — something banks and NBFCs (Non-Banking Financial Companies) view as risky.

By keeping your utilization low, you demonstrate financial discipline and strengthen your overall credit profile.

2. Avoid Applying for Multiple Loans or Credit Cards

Applying for too many loans or credit cards within a short period can damage your credit score. Each loan application triggers a hard inquiry, and multiple inquiries can make lenders think you are under financial stress or facing liquidity issues.

Banks and NBFCs tend to avoid lending to individuals who appear to be over-leveraged or dependent on credit.
It’s best to apply for a loan only when truly necessary and avoid taking on additional debt that could stretch your repayment capacity.

3. Check Your Credit Score Regularly

Monitoring your credit report frequently helps you stay on top of your financial health. Sometimes, your score might drop due to incorrect or outdated information in the report.

Platforms like CIBIL, Experian, and Equifax offer free credit score checks in India. Reviewing your report regularly ensures that you can spot and correct any discrepancies early.

If you find any incorrect entries — such as wrongly reported late payments or closed loans still marked as active — contact the credit bureau immediately to have them rectified.

4. Don’t Close Old Credit Cards

Older credit cards can actually strengthen your credit score. They reflect your credit history length, which is an important factor in score calculation.

When you close an old credit card, your total available credit limit decreases while your utilization ratio increases — which can negatively affect your score.

Instead of closing them, keep your oldest cards active by using them occasionally for small purchases and paying them off promptly.

5. Choose Shorter Loan Tenures When Possible

While longer loan tenures can make EMIs more affordable, they also increase your total interest cost over time. Moreover, lenders view shorter tenures as less risky because repayment happens faster.

When applying for a personal or home loan, opt for the shortest tenure you can comfortably afford. This not only saves you money in interest but also improves your credit profile by showing consistent, timely repayment habits.

Bonus Tip: Pay All Dues on Time

Even a single missed EMI or credit card payment can lower your score significantly. Automate your payments or set reminders to ensure that you never miss due dates. Consistency is the key to building and maintaining a strong credit score.

Final Thoughts

A poor credit score is not the end of your financial journey — it’s a signal to take corrective action. By managing your credit utilization, limiting unnecessary loans, maintaining older accounts, and checking your credit reports regularly, you can gradually rebuild your creditworthiness.

Over time, these disciplined financial habits can open doors to better loan offers, lower interest rates, and higher credit limits.
So, even if your credit score isn’t perfect today, with these five steps, your next loan application stands a much stronger chance of approval.