There can be times when you need a little additional cash to accomplish your short or long-term objectives. Whether it is for a wedding, paying for medical emergencies, buying a house, or fixing up your living room, a personal loan can help you cover all your planned and unplanned expenses.
Personal loans are an unsecured type of credit, which can be obtained without putting up any collateral such as jewellery or a house as a security. Given the nature of these loans, lenders usually consider the borrower's creditworthiness with the help of a credit report while evaluating a personal loan application.
What is a credit report?
A credit report is an in-depth analysis of a person's credit history. It includes details about loans, credit accounts, payment history, and credit inquiries. A credit report is a way for a lender to determine the likelihood that the loan will be repaid in full and within the allotted period. This information is essential because it influences lender’s decision to grant you a loan or not.
The most important part of the credit report is the credit score, which is a three-digit number between 300 and 900. A lower score means that a person has a poor credit history, and a higher score means they have a good credit history. Bajaj Finserv Personal Loans require a minimum credit score of 685.
There are four main credit reporting agencies in India: CIBIL, also known as TransUnion Credit Information Bureau (India) Limited, Experian, CRIF Highmark, and Equifax. These agencies keep track of all consumer's credit history using data mostly provided by lending institutions. You can check your credit score by logging into their platforms online.
Why is a credit report important?
Your credit report contains an assessment of your creditworthiness or financial dependability. The credit report highlights a number known as the credit score. A low credit score is the result of a history of loan defaults, delayed payments, a high debt-to-income ratio, etc. In contrast, your credit score will be higher if you have a history of repaying your loan on time, no history of missing payments, and a low debt-to-income ratio. Having a good credit score can give you access to new possibilities. Here are some of them:
- When you apply for a loan, you have a good chance of being accepted if your credit score is high
- When you have a credit score of 680 or higher, lenders could provide you with a personal loan with a lower interest rate
What is the importance of credit report in personal loan approval?
NBFCs have more lenient lending policies and frequently approve loan requests from borrowers with good credit scores. One should remember that a good credit report and high score are not only important to get a personal loan application accepted, but also for:
- Reduced interest costs
- Quicker approval
- More flexible terms for repayments
- Possibility of receiving a higher loan amount
Therefore, to qualify for a personal loan, borrowers must concentrate on improving their credit scores to increase their creditworthiness in the eyes of the lender.
Monitoring your credit score at least once a year is an excellent practice. You can check your CIBIL Score for free with Bajaj Finance. Once done, you can apply for a personal loan of up to Rs. 40 lakh.
