Credit, in its various forms, can be a very useful tool when used wisely. It can help you achieve your goals and bridge financial gaps, sometimes even in a cost-effective manner. But, to avail of credit, you must meet the prerequisites set by the issuers. Among these criteria is your CIBIL score, which normally ranges between 300 and 900. In general, lenders will require you to meet a minimum score to qualify for a loan and falling short can be a problem. For instance, you can get a personal loan with a low CIBIL score but you may not get favourable terms.
This is because your credit score is a direct indicator of your financial wellbeing. As such, having a good or excellent score is important because lenders also use it to assess your creditworthiness. If you have a low score, you are at a higher risk to lend to and some lenders may even reject your applications. On the other hand, an adequate credit score has several benefits, one of which is that it helps you qualify and avail of low-interest loan deals.
To know how your credit score helps you get an affordable loan, take a look at the following pointers.
Simplifies access to credit
Whenever you apply for a loan, lenders will check your credit score and credit report. This is usually the first part of the screening process and having a strong credit profile will make things a lot easier. Ideally, you should have a CIBIL score of at least 750 with no prior defaults on your credit report. On meeting both these requirements, it is fairly easy to access most forms of credit as you will come across as a creditworthy applicant. In some cases, you may even enjoy the benefit of instant approval for a loan. Lenders offer such perks to truly deserving applicants, particularly those with an excellent credit score.
Improves chances to access exclusive deals
Modern lenders will have exclusive personal loan offers reserved for the most creditworthy applicants. Such loans usually have lower rates and are a lot more cost-efficient. What’s more, some lenders extend pre-approved offers as well. These are personalised loans that are designed to match your profile and are offered based on your credit profile and financial standing. So, if you have a high credit score, your odds of getting such offers are much higher. While rare, special loan deals like these from the right lender can help you get a loan with the most affordable rates.
Enhances your negotiating power with lenders
While some lenders may offer you a deal based on your credit score, you can negotiate for better terms. Depending on your profile and the lender, you can get the loan at a lower, more affordable interest rate or even get a waiver for certain administrative charges. This can save you a lot of money, but it is a perk only certain applicants enjoy. You need an excellent credit score, which is 750 or higher, to negotiate for such a deal. Lenders are less inclined to offer you such a deal if you have a low score.
Grants access to loans with higher limits
Besides making it much easier to access affordable loans, your credit score may also determine the total sanction you can avail. While personal loans come with a maximum sanction, you may not always qualify for the full amount. This may be because your financial or credit profile may be lacking in some ways. However, you can qualify for a larger sanction with an excellent credit score as you have a lower risk of default. So, if you need a personal loan for a big-ticket expense, ensure that you build your credit score so that you don’t run into issues availing the sanction you need.
Your credit score is a critical facet of your financial profile and is among the key factors assessed by lenders. Considering the importance, you should be aware of the benefits of your CIBIL score, how to check it, and ways to maintain it. This will help you both in the short- and long-term as your credit score comes under scrutiny in other financial dealings too. For instance, your credit score will determine your eligibility for a home loan. Additionally, it can help you with visa applications to countries like the UK or USA.
So, ensure that you do all you can to maintain a good CIBIL score to never miss out on credit deals that can save you money. To monitor your credit history and access your credit report easily, check your CIBIL score for free on Bajaj Finserv. This quick-and-easy process can be completed in just 3 steps and has no negative impact on your CIBIL score.
