A credit score is an essential factor for a lender to consider before approving an unsecured loan. It is a number that reflects a borrower’s creditworthiness. Your credit score is calculated by the Credit Information Bureau India Limited (CIBIL). A credit score contains information about all your payments of loans secured from other lenders over a given period.
A credit score is a primary consideration by financial companies before approving all types of loans, including Fullerton India personal loans. If you have maintained a good credit score, it implies that you have good creditworthiness and have a better chance to avail unsecured loans.
What is Considered a Good Credit Score, and How to Maintain it?
The CIBIL credit score is always measured based on your repayment behaviour and credit behaviour. The credit score ranges between 350 and 900. If you maintain your credit score above 750, you are considered a reliable and genuine borrower with the capacity to make repayments on time. Some lenders also accept credit scores below 750, provided you show a stable income source.
Suppose you plan to apply for a personal loan to meet an immediate financial requirement such as a medical emergency or paying for your children’s higher education. In that case, you must never forget to check your credit scorefirst. Various lender’s websites have options for online credit score checkers. The secret of maintaining a good credit score lies in ensuring responsible financial behaviour. It would help if you opt for loan amounts within your repayment capacity so that you can avoid a debt trap and consequent negative impact on credit score.
If you have a habit of forgetting things, you can put reminders to remember making the EMI payments, or sign up for the auto debit facility offered by most lenders. Always ensure that you are not defaulting on payment because it can reflect negatively on your credit score. A well-maintained CIBIL score can help you benefit from a higher loan amount and lower interest rate.
Here are some of the tips to maintain a good credit score
- On-time payment of bills or EMIs.
- Always pay your EMI and credit card bills in full.
- Avoid delaying in paying EMIs
- Avoid defaulting on loans and credit cards.
- Do not close old credit cards.
- Do not make multiple queries at the same time.
- Avoid applying for multiple loans.
- Don’t overuse your credit limits and maintain a healthy debt-to-income ratio (within 30%)
- Maintain a good relationship with your lender.
- Review your credit report every few months.
How to Check your Credit Score?
To ensure that you maintain a good credit score and there are no errors, you should often check your credit profile. Every lender has an online facility to help customers check their credit scores. You can visit your lender’s website and check your credit score. You can also directly login to the CIBIL website and check your score.
You will need to enter the requisite information and generate your personal CIBIL score instantly.
Reasons why a Credit Score is Essential for Unsecured Loans
A credit score is of paramount importance as it influences the loan amount, the interest rate, and your personal loan application’s approval.
- Influences your Eligibility for Loans
If you maintain a higher credit score, you will have more chances of getting loans and credit cards. It also indicates that you have never defaulted on your loan repayments and have experience in handling credit. Lenders offer loans to borrowers who have maintained a good credit score as they have a low probability of turning a defaulter.
If you have a CIBIL score above 750, lenders will likely approve your loan application, provided you have met other eligibility criteria and submitted relevant documents. So, run an online credit score check before applying for a loan.
- Lower Interest Rate
Another benefit of having a good credit score is that it reflects positively on the interest rate. If you have maintained a healthy credit score, your lender will offer you loans at a lower interest rate. Given the repayment history, there is a high possibility that you will get discounts on the interest rate for personal loans.
- Increase Credit Card Limits
Your credit score directly impacts both your interest rate and the principal loan amount. Maintaining a healthy credit score ensures a higher loan amount approval. However, keeping a bad credit score will negatively reflect the credit limit and eventually result in a lower credit card limit. Having a higher CIBIL score suggests that you can handle your finances responsibly, therefore, lenders might consider offering you a higher limit. However, do note that this also depends on your monthly income.
- Quicker Loan Approvals
Many lenders in the loan market offer pre-approved loans to their existing customers who have a long credit history and a higher CIBIL score. You can benefit from the quick loan approvals schemes if you have a healthy credit score. You will not have to wait long for your loan to get approved if you have maintained a good credit score.
- Helps in Visa Application
It also plays a crucial role in your visa application. For instance, if you are applying to visit countries like the United States of America or the United Kingdom, your income tax records are considered to make a decision. Therefore, a healthy credit score can help you get your visa application approved.
Maintaining a good credit score is of paramount importance to get your loan approved. If you need instant cash, apply for a personal loan from Fullerton India and avail of a maximum loan amount with the most attractive interest rate.
Hey, this is Johny Sehgal. I am the owner and caretaker at Finance Jungle. I completed my education in BSC and now heading towards the digital marketing industry. I usually have interests in reading, playing games and watching movies. I also love to write content based on quality information. The main motive of mine is to provide the top and best quality information to my readers. Finance Jungle is the blog for the same.