Borrowers with low credit score not only finds it hard to get lenders but also the interest rates that are offered by the lenders are also very high. On the other hand, those with comparatively high credit scores, are offered low-interest rates.
The closer your credit score is to 900, the higher your chances are of getting a credit card or loan application approval.
The credit score of an individual borrower shows his credit history. This includes the number of credit accounts the borrower has, the total debt he/she has, repayment history, and loan-seeking enquires the borrower has made. The lender then uses this credit score to evaluate the borrower’s repaying ability. Depending on the credit score, the borrower’s loan application is approved.
Note, the closer a borrower’s credit score is to 900, the higher are the chances for him to get his loan application approved.
The chances of getting a loan or credit card are good and increases, with a credit score of 750 and above. The borrower also gets attractive interest rates. If you have a low credit score, it can be difficult for you to find lenders. To assess the creditworthiness of a borrower before approving a loan or a credit card, lenders use credit score and credit report from Credit Information Bureaus. The four credit bureaus in India are TransUnion CIBIL, CRIF High Mark, Experian, and Equifax.
The lenders fetch the borrower’s credit score and credit report from credit bureaus to assess the creditworthiness as soon as they receive an application for a loan. Having said that, lenders also have their own cut-off credit scores, and depending on their own credit risk analysis for evaluating loans and interest rates, they choose the borrowers.
If you want a loan from a particular lender, it might not be possible all the time. For instance, the grading information is not available for all lenders in the public domain. While some lenders mention the credit score needed separately, some do not reveal the credit score required to obtain the loan.
What does having a high score mean? The credit score ranges anywhere between 300 and 900, depending on the borrower’s credit behavior. But the closer your credit score is to 900, the higher your chances are of getting a credit card or loan application approval. According to experts, with a high credit score the lenders are assured and want to lend to such borrowers, hence, having a good credit score gives the borrower the leverage while applying for a loan. Additionally, having a good credit score can also get you a lower interest rate. This is true for lenders who follow the risk-based pricing while setting their interest rates for borrowers.
What does having a low credit score mean? Borrowers with low credit score not only finds it hard to get lenders but also the interest rates that are offered by the lenders are also very high. On the other hand, those with comparatively high credit scores, are offered low-interest rates.
Having said so, the low credit score category differs from lender to lender. Often banks turn down borrowers with a credit score below 750, terming them as less creditworthy and having more credit risk. There are NBFC’s and other financial institutions that approve loans for such individuals, but charge them higher interest rates.
According to experts, if you are not borrowing at the moment, try to improve your credit scores. Individuals with higher credit scores also need to take measures to maintain it. Try to check your credit report at regular intervals, doing so will help you detect any errors, that can pull your credit score down.