Banks and lenders decide loan amounts, interest rates, EMI schemes, tenures based on a host of factors, which relate to your stability and income. If you come across as a risky candidate who can default at payments or abscond with credit, then the bank will not approve the loan application. To check your creditworthiness you are assigned a credit score from any of these three institutions: CIBIL, Experian or Equifax.
Credit report tells about your expending behaviour, amount overdue to be paid, or paid amounts for a loan, enquiries for loan, income, personal details, defaulting history, and comments by lenders, and overall performance with credit over time.
A good credit score is considered 750 above to 900, and banks take credit score seriously. A score of 300 and less than 600 can make you an ineligible candidate for loan application approval and credit cards. CIBIL receives information of your credit behaviour from database of lenders.
What is the Impact of Credit Score on Loan Application?
As depicted, CIBIL score tell your creditworthiness and ability to repay loans. In case you have score of 750, then you are eligible for most of the loans you apply for. The closer your score gets to 900, greater are the chances for loan approval, along with authority to negotiate for better loan terms or interest rates. CIBIL score 0 means that there was less than 6 months of data of credit history, and CIBIL score of -1 means that there was no credit history at all.
You must try to be regular with all credit bill payments and loan EMIs so as not to hamper your CIBIL score. Once the score reduces, it takes time to increase it by performing financially sound activities. Never miss or delay payments beyond the deadline of loan terms or settle the loan or credit card, as it will reduce your credit score and affect your ability to get a loan in future.
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