Your credit score indicates your financial health. Before lending any funds, lenders check your credit score. It is a crucial component in your life because the credit companies gauge you based on your credit score. Your score is important as it affects your health financially in a massive way. For instance, a strong score can assist you to instantly qualify for instant credit loans. Also, with an excellent score, you can avail loan at a low rate of interest. Alternatively, a low credit score can create difficulty in availing of funds during financial exigencies.
In today’s era, availing of a personal loan or any other kind of loan has become common. However, with loans becoming extremely difficult to avail of, it can become troublesome to fund any of your requirements.
What is meant by a credit score?
A credit score is a 3-digit number that displays the rating of your report. Also, it throws light upon the approach to handling debts. Almost all Indian finance lenders use credit score as the benchmark to calculate your financial appetite. Your credit score may fall in any of the distinct ranges entrenched to deduce your credibility.
Distinct credit rating companies might assign you distinct credit scores. The reason for differences in credit scores is different methodologies utilized by different credit rating agencies. Also, distinct credit rating agencies rate you at distinct times. Thus there may be differences in your credit score owing to this also.
You cannot track your score from all rating agencies. So, it is best to keep a thorough tab on just the credit scores displayed by well-known bureaus like the CIBIL, which is accepted by all kinds of lenders. Tracking 1 or 2 top credit rating companies give you a thorough idea regarding its performance, debt-wise.
What is the meaning of a credit score?
A credit score is calculated after factoring in many distinct parameters. They decide how simply you can get the debt request approval. With a credit score, you can easily understand the quantum of risk that lenders face on approving your request for credit. By checking your credit score online, you can understand where on the spectrum you exactly lie. Note for all lenders to check your credit score. For HDFC CIBIL score is important also; for ICICI CIBIL score is necessary, and the same is for almost all lenders.
Your CIBIL score shows your credit risk profile in the listed ways –
∙ Credit score between 750 – 850 represents responsiveness towards debt constituent. A credit score in this range shows that you are extremely careful in making repayment of debts.
∙ Again, a score falling in the field between 700 and 750 is considered average by most credit rating agencies.
∙ Most individuals having credit scores in the range between 600 and 750 may be denied loans due to low credit scores. If your loan is approved at this credit score, it may be at a higher interest rate.
∙ If your credit score is below 600, it is extremely tough to avail of a personal loan.
If you hold a low score, you should work to ameliorate your position. You can do so by reaching out to different lenders. Then, you can form a favourable payment structure and address all debts with appropriate planning. It is crucial to remember that a credit score is only a prediction rating. It is formed to show your chances of making the repayments on time to lenders. Thus, your score keeps a continuous check on your credibility and repayments.
Can you get loan approval with a low credit score?
Availing approval for a loan or any other credit option with a low score by the bank is tricky. There may be times when despite a good credit score, your loan may be turned down due to years back poor credit repayment history. If you hold a lower credit score and want to ameliorate it, you should know the basic causes of a lower credit score. Additionally, you must know crucial ways to ameliorate it to get the loan approval of your choice.
Listed below are causes and ways to ameliorate lower credit scores –
Basic causes of low credit score –
A low credit score can get you loan rejection. Listed below are the basic causes of low credit scores –
High credit utilization
It negatively impacts your credit score when you use more than 30 per cent of the credit limit. You must ensure to keep close track of your expenses and remain mindful at the time of managing your different loans to maintain a good credit score.
Various outstanding loan repayments –
Before approving your credit loans, lenders tend to review your financial history. When you hold a low score with various outstanding payments or debts, your loan application may be rejected eventually.
Applying for a loan after facing rejections –
Continuously applying for loans on instant loan applications even after facing rejection once will not assist your credit history. Once you place the application for a loan and witness rejection, that info is stored in your report. So, when applying for a loan, remember the lender will review your provided info. If your credit history or credit score is low, lenders may turn down your application. This further lowers your credit score.
What are the ways to ameliorate your low credit score?
A low credit score cannot let you avail the loan times you need. However, there are various ways which can be utilized to increase your credit score. Ways include –
Avoid applying for multiple credit applications simultaneously.
Are you one of those with the habit of continuously applying for loans in a short time span? If yes, then you should avoid it. This habit discourages lenders from approving your loan application as they consider you a credit-hungry individual. Applying for loans with various lenders results in various hard inquiries by different lenders to check your credibility. This further lowers your credit score.
Do not miss out or delay in making your loan repayments
Make sure you pay your credit card bills and EMIs on time. This is because missing out or delaying repayments can lower your score considerably.
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