Friday, 1 March 2013
Review your credit score before applying for a loan
Honestly, how many people in your network really know what is a Credit Score? Why is it needed? Who maintains it? I am sure the answer you will find with only 5-10% people. Only a few really know, there are bureaus who maintain your credit records. Banks are required to report loan repayment status of all their customers to the credit bureaus. Before issuing a fresh credit card/ loan to a customer, various lending institutions refer to the reports/ information provided by credit bureaus about the customer's track record of repayment. Delay in repayment may impact your credit history maintained by the credit bureau.
Now, what is a credit score? Credit score is your credit rating based on your credit history that is maintained by the bureaus. Bureaus like CIBIL and EQUIFAX maintain detailed credit history of the customers and provide these to financial institutions on request.
Banks usually check your credit score before lending you any secured or unsecured loans. The minimum score to avail loan is 750. Any loan application by a customer having a score below 750 is most possibly to get rejected.
Now, it is also important for people to know what effects their credit score. Well the credit score is affected by your past credit history with the banks. Any loans that you might have taken with the bank, any credits taken by the bank etc are all maintained by the bank. Bureaus usually provide a credit rating based on your credit repayment performance. A healthy credit score will make you eligible for any loan, a poor credit score will leave you an orphan in the credit giving banks and it will be difficult for you to procure loan with any bank.
How can people maintain a healthy credit score so that their loan applications are never rejected? I will comment on this in my next blog.
CIBIL scores can be gathered from cibil.com website at a cost of Rs 470/- (current rate). You will be delighted to see the detailed credit report. I never knew all my credit history with the banks i could see in one single document. Any due or bounced payments always have a negative impact on your credit health. Hence, be cautious and always maintain a healthy credit history.
Do revert back if you have any questions.
Posted by Nitesh RS