Maintaining a Healthy Credit Score with Active Online Loan Applications

Have you tried applying for an emergency loan from a fintech lender? If you have, there are a few things that you need to know about online lending, especially to maintain a healthy credit score.

According to data from Asosiasi Fintech Pendanaan Bersama Indonesia (AFPI), as of May 2024, Indonesians have borrowed a total of Rp 874.5 trillion from fintech lenders. The distribution portion was mainly carried out in the productive sector at 30.61%, meaning the rest of the loan distribution might be utilized for various purposes, including emergencies, such as medical, sudden financial loss, and even accidents!

In general, anyone with the ability to repay can apply for an online loan for various reasons. However, it is crucial to learn that the volume of lending one applies can affect one’s credit score. For those unfamiliar with it, the credit score is numerical information that represents an individual’s creditworthiness. In Indonesia, you can obtain a credit report through SLIK OJK, but if you’re looking for credit scores and a detailed analysis of your credit, private credit bureaus (PCBs) like PT CRIF Lembaga Informasi Keuangan (CLIK) offer these services.

For those who actively engage in loan applications with shorter tenure, like those from fintech lending companies, President Director CLIK Leonardo Lapalorcia encourages debtors to check their credit reports through PCBs directly or via partners such as Amalan and Skorlife. “This is because the credit report from PCB will generate a score that tells your risk group. At CLIK, we also collect and manage data from the financial institutions (FIs) that have not yet reported to SLIK, including your loan history in fintech lending companies,” explained Leo.

Read also: CLIK Enhancing Client Experiences through Innovative Credit Bureau Solutions

The credit score analysis from PCB can be used as a comparison report when a debtor finds a mismatch between data from the Bank or other financial institutions. “Most financial institutions heavily rely on borrower’s credit data from SLIK OJK. Unfortunately, these data have limited reach,” added Leo.

CLIK is committed to contributing to opening wider credit access for Indonesians. “We believe online lending can be very beneficial if used wisely. Therefore, from a business perspective, CLIK encourages loan providers to synergize in sharing their credit data so that potential borrowers can get their most comprehensive credit assessments from SLIK and PCB. By doing so, we believe we can reclassify risk groups among many debtors,” Leo continued.

Leonardo also shares the key to forging a good credit reputation while having an active loan application. “Having a current payment is important and try to stay below your credit limit. This way, financial institutions will see you as a responsible borrower, which can pave the way to many opportunities to access deeper financial products or services in the future,” he said.

Overall, the following are the key points to consider to maintain a positive credit score.

• Understand the Terms and Conditions of Online Lending

Each online lender has its own terms and conditions. Make sure you pay attention to the amount of interest charged, both fixed interest and annual effective interest. Additionally, ensure that the repayment period aligns with your financial situation, and make sure to know any late payment fees that may apply. By knowing all the terms and conditions, you can make the informed financial decision and manage your finances more wisely.

• Pay Attention to the Amount of Debt

It is important to calculate your total debt and ensure that it does not exceed 30% of your monthly income. Avoid taking loans that surpass your ability to manage monthly repayments, even if the lender offers a higher credit limit. Conduct a thorough assessment of your financial situation to determine your capacity to repay the loan. This approach helps prevent over-borrowing and ensures long-term financial stability.

• Monitor Your Credit Score

It is crucial to monitor your credit report regularly. By checking your report periodically, you can monitor changes in your credit history, identify any errors or inaccuracies, and take prompt action to correct them. You can also check the credit position through services from a Private Credit Bureau like CLIK for a more comprehensive reading.