As loans create a financial obligation to repay them from future earnings, people should avoid taking loans, unless it's very urgent or one wants to create assets or increase one's earning prospects.
As loans create a financial obligation to repay them from future earnings, people should avoid taking loans, unless it’s very urgent or one wants to create assets or increase one’s earning prospects. However, to obtain a loan on favourable terms at the time of requirement, one should always maintain a healthy credit profile.
“In today’s unstable socio-economic climate, an individual may require a loan at any time. The sky-high inflation, volatile ups and downs in the market, and add to that; the post-pandemic turbulence. These factors can surely necessitate a need for credit in any person or organisation that wishes to meet these importunate expenses in the new normal. For availing credit from any fintech enterprise or NBFC, you need to mark a few ticks. First and foremost, a solid credit history is a must for obtaining any form of credit in the present as well as the future,” said Rohit Garg, Co-Founder and CEO, SmartCoin.
To make a credit profile healthy, a person should have a clean credit history backed by a good credit score.
Garg explains how a good credit history can positively affect your loan application:
- A good credit history can help volumes in improving your overall credit report. If your credit score is high, you will receive low interest rates and fewer charges.
- A sound credit background also enables faster processing of loan requests and credit applications. This can prove invaluable in case of a medical emergency or any such unforeseen event.
- Your prospective lenders will regard you as a responsible and trusted borrower if you ensure the timely repayment of dues.
- A good credit history means you can have your favorite pick from a plethora of credit options. When it comes to obtaining credit loans, the luxury of choice is limited only to those with a favorable credit score.
- A good credit history is further more desirable. A person with a solid credit background will obviously be exempted from recurring reminder calls and personal visits from loan collection agents or legal repercussions.
Contrarily, an individual’s bad credit score will naturally hold dire consequences for them.
Garg lists the implications of having an unhealthy credit score:
- You risk being blacklisted by lending companies and other financial institutions if you prove to be a reckless buyer or borrower.
- Unlike those with a sound credit score, your choice of credit options will trickle down to a bare minimum.
- Any loan applications or credit requests that you submit will be rejected on the grounds of a poor credit history riddled with outstanding EMI payments, debts, pending credit card dues, etc.
- A number of employers across companies follow a policy of verifying an applicant’s credit history as part of the formal process. A bad credit history can significantly reduce your chances of coming on-board.
- That’s not all. If you wish to start your own business, a poor credit score is bad news. No lending company or financial enterprise will ever consider sanctioning any credit to you.
“Therefore, having a positive and healthy credit score is of the utmost importance. As you can see, it can literally make or break a person. Make sure that you always keep a good credit profile and uphold the best financial practices to stay ahead, both in business as well as personal life,” said Garg.