What is a credit score?
You must be thinking that what is a credit score for a personal loan and how does this affects your loan application. In simple terms, a credit score is a number between 300 and 900 that determines how timely and regularly does a person makes his loan payments. Generally, it is advisable to have a score of 750 and above so that your personal loan application can qualify. A credit score is a three-digit number that gives banks a quick idea of your capacity to repay the loan amount. The higher the credit score, the better are the chances of your loan application to be approved.
What impacts credit score
The score goes low when a person who has borrowed from the bank does not make regular and timely repayments. It also goes low when a loan seeker becomes a regular money defaulter in the eyes of the lender. However, you can get a personal loan with a poor credit score.
If you make irregular or late payments in paying your EMIs for the loan consistently, then the bank officials are of the view that you are having trouble paying your existing loan obligations. This will negatively affect your credit score.
New bank accounts
If you have many bank accounts and still you open new bank accounts to secure multiple loans and credit cards, then the lending bank will view your application very carefully and they will be cautious against you because for them this act of yous indicates your debt burden has increased, which will negatively impact your score. If the bank found something wrong then the bank may reject the personal loan application.
A higher number of loans
If you have availed many secured loans and many unsecured loans and you make defaults in paying EMI’s for such loans, then surely this will be going to impact the score. Therefore, it is advisable to you that should keep a balance between the secured loans such as Home loan and Automobile loans, and unsecured loan such as the Personal loan, as it will have a more positive effect on your credit score.
How is a higher credit score beneficial?
There are various benefits of a higher credit score
- A higher score indicates that your track record is good concerning loans.
- Banks can grant you the waiver of processing charges.
- If your score is higher than 750, your chances of securing a loan are high.
- You can negotiate with bank officials for lower interest rates on personal loans.
- A higher loan amount can be secured by the lending banks.
Therefore, if you want that your loan application should be processed timely and your loan amount should be approved in less time, then you should maintain a good credit score. Keeping a bad score will not help you secure a loan from the leading banks.