Credit Score

Why Banks Or Any Financial Institutes Check Your Credit Score Before Providing You A Loan?

Depending on how well you’ve managed your finances in the past, you’ll receive a letter grade on your credit report known as your credit score. This three-digit figure is typically in the 300-900 range. Various organizations, called credit bureaus, are responsible for determining an individual’s creditworthiness. Your credit score will be different between bureaus because it will be compiled using data from various sources. Customers with higher credit scores are more likely to be approved for loans since they pose less of a risk to the lender.

Your loan eligibility might be affected by a number of factors and for that you should know how to cibil score checking. Your credit score and the details of your credit report are the primary factors in deciding whether or not you will be approved for a loan and, if so, at what interest rate.

How Does Credit Score Impact Loan Acceptance?

Before approving your loan or credit card application, lenders such as banks and non-banking financial organizations rely on credit reports. Credit information businesses, often known as credit bureaus, evaluate a consumer’s credit record. The credit bureaus collect, collate, and organize information from their members (consumers and lending institutions) in order to offer a customer’s credit history and creditworthiness. There are currently four major credit bureaus in India. The Reserve Bank Of India has granted authorization to TransUnion CIBIL, Equifax, Experian, and CRIF Highmark (RBI).

There are numerous ways to obtain a credit score, and you may have a variety of credit ratings. Your credit score can vary based on the credit reporting agency that is utilized. The majority of loan providers evaluate scores from all major credit reporting agencies and base their offer on the agency.

Errors on your credit report can significantly lower your credit score, which could result in a higher interest rate and more money out of your pocket. Therefore, it is essential to review your credit report and repair any inaccuracies well in advance of loan application.

Your credit score is simply one factor in the lender’s choice, but it is a significant one.

Read also: What Is A Free Credit Score And Why Do We Need CIBIL Reports?

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