Credit Score

The all Important Metric to Boost Your Loan Application

Whether you are an individual, a business owner or a partner in a company, if you are in the market for a loan of any sort, you must know that your credit score can make or break that deal. But, what exactly is a credit score? What’s a good credit score? Do you have any say in how the score is calculated? But most important of all – what’s the future of your loan application if your credit score is not all that great? Let’s find out!!

What is a Credit Score?

A credit score is a mathematical number that banks and financial institutions use to gauge that all-important question – should they lend to you? You see there are two loan categories – secured and unsecured loans. Secured loans are where you offer banks collateral such as that fancy new car you just wheeled out from the dealer against a car loan, or the house you just bought against a mortgage. Unsecured loan as the term suggests has no collateral. Most credit cards and personal loans fall under the unsecured category. But regardless of whether you take a secured loan or an unsecured one, whether you take a personal loan or a business loan, the lending financial institution just wants to ensure that you pay the E.M.I (equal monthly installment) on time. While that’s akin to trying to guess the future by gazing into a crystal ball, bankers do love to minimize risk (and maximize returns). So what they do is look at all your accessible financial records – loans you have taken and repaid, and credit cards used. Don’t worry they aren’t looking at what you bought online. A good credit score implies that you are punctual at paying the EMI, a low credit score indicates that you can be unpredictable when it comes to loan repayment. A low credit score is associated with you being a high-risk customer, while a high credit score means that most lending institutions would only be happy to give you more money. A high credit score improves your chances of borrowing from a bank or financial institution in the future. A poor credit score, well that’s not such good news. Most banks and financial institutions in India would be unwilling to take a higher risk unless you can compensate them via other means. Typically, a bank/ financial institution would charge a higher rate of interest or seek additional collateral from such borrowers. Depending on whether you are applying for a loan as an individual or as a business/ company these two credit scores can impact your chances of loan approval-

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