The role and impact of credit score on loans you avail are significant. A credit score is a three-digit numerical figure that reflects your creditworthiness. You can easily check credit scores online on various platforms that provide the feature of free credit score checks. If you are opting for a new loan, then credit score is one of the crucial factors that lenders check to decide whether to accept your application or not and if yes then at what rate the loan should be advanced to you.
The credit score is a major eligibility factor in case of personal loan, while in case of home loan due to long tenure your repayment habit makes a significant contribution in improvement or decline of your credit score. A credit score is calculated based on the information like credit card bills, timely or late payments, defaults on loan (if any), credit mix, credit utilization limit used, number of loan applications, etc. Also a regular credit score check is a must.
A credit score is crucial in the sanctioning of your new loan. If you have a good credit score with a strong credit history, then it is very likely that your loan application will be accepted. It is easy for lenders to put faith in those individuals who have the visible past record of managing their debt well and paying them off on time. On the other hand, if your credit score is on the lower side, then the chances of a loan application being rejected increases. Especially in case of personal loans as it is an unsecured loan, so, except for the creditworthiness of the borrower, the lender does not have any other security for their investment.
Credit bureaus calculate the credit score; some of the popular credit bureaus of the country are TransUnion CIBIL, Experian, Equifax, CIRF, etc. These bureaus collect data of the borrowers from banks and NBFCs from time to time and calculate the credit score for each one of them. The score gets updated on a monthly basis. Along with checking your credit score, you can also get the detailed credit report in which you can see all the information based on which your score is calculated. The credit report can be a great tool to identify the points which are contributing to the drop in your credit score, based on it; you can take the necessary steps to improve your CIBIL score. Also, sometimes the report may also have an error due to which it might be resulting in the drop of your credit score. If you come across an error in your report, then make sure to highlight this to the concerned credit bureau who issued the report so that they can rectify the error.
You can easily check your credit score online. If you opt to check on the website of credit bureaus then after the first check you will be required to pay a certain sum of money for each credit report. However, there are various other online platforms that provide the service of free credit report checks on their platform irrespective of the number of times you pull. These platforms can do so because they have partnered with these credit bureaus.
The habit of checking your credit report regularly will help you track your credit performance, spot any errors in your credit report and also work on those aspects which are contributing negatively to your overall credit score. Apart from the extreme importance of credit score in unsecured loans like personal loan, CIBIL score also holds importance while you are availing a secured loan like a home loan. It is because many lenders decide the interest rate based on the credit score even though they are approving the application based on income level and value of the property.
Thus, the impact of credit score can have on loan is significant. It can literally be the measure on which a lender can decide whether to accept your application or not and what rate of interest they should charge from you. That’s why the higher a credit score you have, the better it is.