A credit score is an important number that shows an individual’s credibility by assessing your credit history. It generally ranges from 300 to 900, which predicts the probability of timely repayment of the loan by you. A higher score enhances the possibility of availing loan approval, bigger loan proceeds and a lower rate of interest.
You can avail your credit score through CIBIL and various other credit bureaus like Experian, Equifax and CRIF Highmark. CIBIL full form is Credit Information Bureau Limited, which fetches your credit behaviour through lenders and issuers. To avail your CIBIL report, you must first ensure you have a CIBIL login registration detail. Next, sign up for CIBIL and apply for the credit report.
When determining whether to approve the credit option, banks, and financial institutions factor in your credit score, which is computed by reviewing your various parameters like outstanding loans, credit repayment history and your credit card usage pattern. Here in this article, mentioned are advantages of having a strong credit score when securing a loan.
How can a strong credit score assist in getting a loan?
Lenders review your score to view if it is risky to offer you the funds. If you hold a strong score, it is simpler to avail loan approval and you will require paying less interest constituent. Those with higher scores are viewed as less risky and are way better at making repayments on time. However, if you hold a low score, you may not avail the loan or you may have to pay higher interest because there’s a higher probability of you not paying the money back timely.
Holding a strong score is not only helpful for availing a loan approval but a lower rate of interest. Also, it endows you the power to negotiate proper loan terms like a lower rate of interest or request for a longer time period to repay the money. To keep a strong score, ensure to pay bills timely, use your credit in a disciplined manner and timely review your report for any errors.
Also Check: CIBIL Full Form
Mentioned here are some of the important ways of holding a strong score, which can assist you to secure a loan –
· Higher approval chance
When determining whether to provide a loan, lenders view a strong score as proof to understand your repayment potential. So, holding an excellent score can ameliorate your chances of availing a loan approval.
· Lower rate of interest
Lenders might provide a lower rate of interest to you as a borrower with a strong score, as they are viewed as less risky. This helps save you funds during the loan’s repayment period.
· Faster loan processing
Lenders might prioritise borrowers with a strong score as they show lower credit risk. This can lead to quicker loan processing and faster approvals.
· Higher negotiating power
Holding a strong score can provide you good leverage when negotiating for feasible loan terms, permitting you to negotiate for a better rate of interest, charges, or repayment tenures.
· Better loan terms
If you are a borrower with a strong score, then you might be eligible for a favourable loan term like higher repayment tenures, higher loan proceeds or lower charges. Overall, a strong score can considerably enhance your chances of getting a loan and obtaining suitable loan terms.
How can you ameliorate your credit score?
If your score is fair or low, ensure to carefully follow the listed steps –
· Set reminders to make sure you do not miss out on any credit repayments.
· Keep all your old credit cards in good form, so that you can maintain a long credit record.
· Keep complete track of your credit limit to assess your spending pattern.
· Borrow from various ranges of lines of credit to potentially get a lower rate of interest and higher loan proceeds.
· Consider taking a longer repayment tenure while availing a loan.
· Repay one loan completely before availing another one.
Ending note
Holding a credit score of anywhere from 750 to 900 makes it probable for you to get a loan with a low rate of interest. To maintain a strong score, it is necessary for you to pay your credit dues timely, use your credit in a disciplined manner, repay your credit debts, and restrict making hard inquiries. While a few financial institutions and banks might offer loans to you with a low or fair score, eligibility requirements must be confirmed by discussing with the lender directly. Usually, it is recommended that you to aim for a strong credit score to enhance your chances of availing a loan with suitable terms.
Frequently asked questions (FAQs)
Is it possible for you to get a loan despite holding a low credit score?
Yes, a few financial institutions offer you as a borrower with a low score, subject to specific conditions. It is recommended that you connect with financial institutions and understand all prerequisites before you place an application for a loan.
How can you avail a low rate of interest on the loan?
Financial institutions provide a comparatively low rate of interest on loans to you as a borrower with a strong score of over 750. However, it is recommended that you contact the financial institutions to get a thorough understanding of the overall approval procedure for a loan.
How to get a Rs 1 crore loan from a financial institution?
If you hold a strong score, you might qualify to get up to 80 per cent of the overall loan proceeds you apply for. For instance, if you place an application for Rs 1.20 crore or a higher amount, you might get approval for a loan of Rs 1 crore. Also, lenders evaluate your financial stability, income, repayment record and other parameters before determining the loan proceeds you are eligible for.
What is the credit score required for a personal loan?
A credit score is a three-digit number that is issued by an authorised credit bureau. This is issued based on your credit history which ranges anywhere between 300 and 900. A score of 750 and above is looked upon as good by lenders.
