Individuals who have applied for a loan would be well aware of a credit score, but first-time borrowers are often confused about the term. So, they need to know what a credit score is? Most borrowers also remain unaware that a credit score has a direct impact on your personal loan application. So, why is a credit score important to get a Fullerton India personal loan approval quickly?
In this blog post, we give you all the details.
What is a Credit Score?
A credit score is a numerical representation of a person’s credit history that reflects their current and past financial well-being. The score is used to determine risk tolerance and creditworthiness.
A lender will take your debt history and compare it with the debt you are looking to borrow, when you apply for a loan.
It is an objective metric that helps people understand how much money they can borrow and allows them to take out loans.
Credit Score can also be used as a benchmark by lending companies and is given by credit bureaus like CIBIL. It takes into account the credit history – the loan you have taken, if the repayments were made on time, income, applications rejected by lending companies and more. It is usually a figure between 300-900, with 600 and above considered a good score. A credit score of 600 is considered a good score for borrowers applying for a loan against property or other secured loans, while above 750 is considered an excellent score for a personal loan (or other unsecured loans).
Why is a Credit Score Necessary for a Personal Loan?
Most lending companies ask for a credit score at the time of loan application to determine the applicant’s creditworthiness. As the lending company gets data from your CIBIL score, they’ll be able to make a judgement based on the score.
Let us look at some of the reasons why a good credit score important to get a personal loan quickly:
A good credit score is an essential part of the financial services industry and directly impacts your personal loan application. It leads to faster approval as lending companies will undertake credit score checks to see if it meets their eligibility requirement. Getting the in-principal loan approval faster saves a lot of time, and lenders will be able to quickly move on to verification and other subsequent processes. . When your loan gets approved, it will further improve your credit score.
An applicant can’t apply for a personal loan if they have a bad credit score. A good credit score will determine whether or not you can be trusted to repay a loan as per schedule. In addition, it convinces the lending company that you are financially responsible, and have a clean record of repaying your loans (including credit card bills) on time. Since the lenders are convinced of your creditworthiness given by a high score, it can be advantageous; as it will help get the loan sooner than the others.
Many lending companies will offer a lower interest rate to individuals with a high credit score compared to interest rates offered to individuals with a low credit score, all other things being equal. If you don’t have a good credit score and apply for a personal loan, you may have to pay higher interest rates, or your application may even get rejected.
How can you Improve your Credit Score?
As we have seen, there are many reasons why a good credit score is important to get quick approval for loans such as Fullerton India personal loan approval. The lending companies undertake a CIBIL score check, and hence it is an excellent idea to improve your CIBIL score before filling out an application form.
Let us look at the steps you can take to improve your credit score
1. Make sure you are paying your EMIs on time. Timely payment of EMIs has a positive impact on your credit score.
2. If you have multiple loans, consolidate them into one loan and try to negotiate a better interest rate. This way, you will improve your loan to value ratio rating, increasing your chances of quick approval.
3. Do not apply for many loans at one time, because every loan application that is rejected hurts your credit score.
4. Always pay your EMIs in full, rather than try to attempt part-payments.
5. Do not utilize more than 40% of your over-all credit limit
It is advisable to not apply for a personal loan with a low credit score, as it will lead to rejection of your application which will further lower your credit score.
Personal loans are quite popular among Indians as the terms and conditions are less stringent when compared to other loans. You do not have to spend a lot of time hunting for a loan and then waiting for approval. A good credit score convinces the lending company that you are a trustworthy borrower and helps to get the loan approved quickly. Getting a personal loan is not a cakewalk if you are not careful in applying for one. Hence, it is important to have a good credit score.