Why Your Credit Score Matters for a Personal Loan

The credit report plays an important role in getting you any kind of loan or borrowing from the bank and financial services, hence you can avail the desired amount after checking your scores. Your credibility increases if you have any investments, like insurance, fixed deposit, and saving in your bank account. But any transaction we make can have a negative or positive impact on our credit or CIBIL scores.    

Importance Of Credit Score

Your CIBIL score increases positively when you pay your outstanding loans or EMIs before the due date, do not do delay your bill payments, and by paying your credit card bills on time. You can check your CIBIL score online. Your income and any kind of revenue you might receive also are seen by the credit bureau and help you increase your credit scores.

A negative event can affect your credit score for personal such as not paying your bills on time and late fee payments. Most negative impacts can stay at least 7 - 10 years on the report from the last date of activity on that account.

Any late payments on your loan account can impact negatively on the report till seven years, this also includes activities such as applying for a new credit account too early. And if you close a credit account, that can stay on your report for 10 years.

Late payments of your loan, credit card or any dues can be a negative impact on your credit score; it will stay on your account from 7 to 10 years from the initial date that the account was due. The late payments that are 30 – 60 days overdue is going to have a lesser impact on the credit report than payments that are 90 days past their due date.

Bankruptcy can also have an impact on an individual’s credit report; the report can reflect from seven to ten years from the date of filing the bankruptcy.  Foreclosures can also be affecting your score till 7 years. But the good news is if you maintain all other accounts properly and made payments time, our credit score can bounce back within 2 years also.

Effect On Personal Loans

In order to get the loan, the CIBIL credit score is very important. As per CIBIL rating, the minimum rating of an individual should be above 750 in order to avail a loan. Higher rating lowers the rate of interest offered by the banks on a secured loan.  You can apply for the loans on the bank's online portals or just walk in one of your favorite bank’s branch for further assistance. The bank will also help you check your credit score.

If in case your credit score is not up to the mark, you can sometimes require a guarantor whose rating are up to the mark and can avail a loan on your behalf.

In the case of not being able to pay the loan on time, the bank sends your loan account to a collection agency which will have a certain clause different than banks and have an authority to collect the outstanding for the bank.

Another record such as legal court judgment on tax lien against your property can affect you for seven years. In some cases, it can be on the report forever until you put in a request for them to be removed.

If you have checked your credit report recently, and you are worried about the bad credit ratings, don’t worry. There are a few things you can improve your scores by evaluating the negative items that impact your credit score and checking how much of an impact it has on your score. In the future ensure to make payments on time, and avoid mistakes and manage your money with a proper financial plan.

Must Read: Using a Personal Loan to Better Your Credit Score