Modern lenders have made it very easy to apply for different types of credit. Today, you can visit the lender’s webpage, fill out the easy form, and get approval within minutes. What’s more, these fintech advancements have improved loan underwriting processes, too, making it possible for you to get instant funding completely digitally. However, before you apply for such loans, take the time to check the prerequisites. You shouldcheck the CIBIL score, age, and employment-related requirements set by lenders,as these will affect approval.
From these, a particularly important one to note is your CIBIL score. It is often the first factor of your profile that lenders assess. Read on to better understand why it is important to check the CIBIL score before applying for a loan.
Determines your eligibility for the loan
The main reason to check your CIBIL score before applying for the loan is that it is a key part of loan eligibility criteria. Most lenders will mention the minimum CIBIL score required to qualify for the loan, which is usually 650 or higher. However, for an affordable loan, you may be required to have a CIBIL score of at least 750.
Do note that you can still get a loan even if you have a low score. While some lenders may reject your application due to a poor score, others may have other offerings you can avail of. Getting a personal loan with a low CIBIL score may require you to submit additional documents and proofs to lenders and the terms offered may not be favourable.
Provides you with insight into your creditworthiness
Besides determining your eligibility for the loan, your CIBIL score can help you understand your creditworthiness. If you aren’t assigned a CIBIL score, it means you have no experience with credit. As such, you are less likely to qualify for big-ticket unsecured loans. If you have a CIBIL score that ranges between 350 and 549, you have a bad score with a high risk of defaulting on payments. Lenders will not consider you a creditworthy applicant. A score ranging between 550 and 649 is a fair score, and you may qualify for certain loans.
A CIBIL score between 650 and 749 is considered a good score that many lenders will deem adequate enough for approval. Finally, a CIBIL of 750-900 is an excellent score and it will get you the best loan offers.
Allows you to avoid the negative impacts of loan rejection
Knowing your CIBIL score before you apply for a loan can help you reconsider your decision. Getting rejected for a loan does have a negative impact on your CIBIL score, reducing it temporarily. This is because lenders incite a hard inquiry into your credit report and this is reflected on your credit history.
Multiple such inquiries and rejections are red flags to lenders,and you may be considered a credit-hungry applicant. Many lenders do not sanction loans for applicants with such a profile as there is a high risk of default. However, if you have applied in the past and have been rejected, wait for a few months before applying for a loan again.
Gives you an idea of the loan terms you can expect
The loan terms such as the interest rate, sanction, and even the tenor can be affected by your CIBIL score. Availing a personal loan with a low CIBIL score will have its downsides: a higher interest rate and a lower sanction. In some cases, you may not get the ideal tenor. On the other hand, with a high CIBIL score, you can qualify easily and get the loan on flexible terms. This allows you to find and avail of the best loan offers in the market. What’s more, with a high CIBIL score, you can negotiate with lenders and get a much better deal than advertised.
Your CIBIL score is a very important part of your profile, which is why you can’t ignore it. Lenders will assess your credit profile thoroughly,and a poor score will lessen your chances of getting approval. Thankfully, you can build your CIBIL score and do so is well worth the effort. The best and most reliable way is to be consistent with payments and avoid making multiple credit applications. To check the CIBIL score easily and download your credit report, visit the Bajaj Finserv website to avail of the service.
You can check your CIBIL score for free in 3 quick and easy steps. The process is very simple and takes just a few minutes. All you have to do is enter your details, verify your identity, and view your report. What’s more, there is no negative impact on your score when you check CIBIL score online via this service.
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Disclaimer: This content is distributed by Bajaj Finserv Ltd. No TNIE Group journalist is involved in the creation of this content.