At the time of raising personal loan, it is vital for borrower to have a good credit score. This is one of the most important criteria which lenders check to determine creditworthiness of a borrower.
Credit score, also known as CIBIL score, is a three-digit number between 300 to 900 which indicates the loan repayment ability of a customer. There are four RBI-licensed credit information companies in India. These are CRIF High Mark, CIBIL, Equifax and Experian.
A score above 700 is supposed to be a good credit score and the score less than 600 is considered poor. You can check your credit score here.
A good credit score means the person’s past credit behaviour is impressive and a low credit score implies there were a few delays or default(s) in loan repayments and payment of credit card bill. Having a good credit score helps loan applicants in the following ways.
Credit score helps in these ways:
I. Loan Approval: Lenders tend to check your credit score. A higher score implies that the applicant is a low-risk borrower, raising the chances of approval. A low score (i.e., below 650) can lead to rejection.
II. Interest rate benefits: Those who have good credit score manage to attract lower interest rates. This is because lender gets confidence that you will repay on time. A poor score means banks would charge a higher rate to cover the risk.
III. Eligibility: Lenders may offer you a higher loan amount to applicants with a high score. With a weak score, the sanctioned amount is typically reduced.
IV. Fast processing: Those with high credit score get instant loan approval or pre-approved personal loan offers. One may also negotiate for better terms including tenure, EMI options and processing fee waivers.
V. Trust factor for future credit: A good score helps with personal loan and also builds credibility for future loans as well such as car loans and credit cards among others.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
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