Loans and Your Credit Score

Loan needs no introduction now–a–days, as most people have taken some loan at some point of time in their life, to meet their financial needs. Loan is an amount of money borrowed by a borrower from a bank or financial institution, for a fixed period of time. A loan is essentially a debt which has to be paid to the lender with interest until the entire loan amount has been repaid. Loans are a vital part of our finances and social well–being as they help us manage our finances; however it is important to know that creditors check your credit score and report, to evaluate your loan application. The history of loans began thousands of years ago since the beginning of civilization and farmers used seeds and grains to borrow capital and livestock as repayment options. Since then, the lending process evolved into a complex financial procedure before progressing into a modern, streamlined system in the digital era. Though loan in India is a tedious process, it is not so arduous for those, who have good credit scores. Let’s see how the credit score impacts the decision process of a loan. First Loan Application is filled by applicant Then Loan application received by lenders or creditors Lenders or Creditors check your credit score and credit report Low Credit Score Leads to Loan Rejection High Credit Score further leads to eligibility check with basic documentations Non Eligibility lead to Rejection of Application Eligibility will lead to Loan Approval Only those applications, who have qualified the minimum credit score criteria, will go to the underwriter for further process. Different lending institutions have different criteria for different products but, for checking the credit scores is the almost always first step. So, it is important to maintain your credit score to have your application at least approved for the underwriting process. Beside this, a good or excellent credit score will earn you better interest rate and low processing fees. It will even give you the power to negotiate with your creditors. The future of loan is now modernized; you have an online comparison site for loan interest and eligibility along with an EMI calculator. All these factors help you plan your loan, and budget your financial situation in a better way compared to the earlier times. With the current time and modern use of technology, the loan process is now hassle–free. In a nutshell, we can conclude that your credit score has a significant effect on loan application. Well maintained credit scores with good credit history should be everyone’s aim.

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