Most of us require funding in the form of loans at least at some point in our lives for taking care of diverse needs. As a result, maintaining one’s credit score is highly necessary. This is one of the most important factors determining whether you will get approval for a loan or not. The credit score helps lenders make sure that you have a good loan repayment history and your overall creditworthiness. They can work out whether you are reliable when it comes to managing and repaying debt through your score. Also, the credit ratings also help in establishing the kind of loan that is the best for your needs.
Credit scores are three digit numbers which can be between 300 and 900. The credit scores in India are calculated by bureaus such as CIBIL, Experian, TransUnion, CRIF High Mark and Equifax. CIBIL scores are mostly used by lenders for determining your eligibility for a loan. A credit score above 750 is usually enough when it comes to getting a loan. The closer your score is to 900, the higher your chances of getting approval for your loan.
You have to first ascertain whether you have a credit score. There are many who do not have any official credit history since they do not have any credit instruments in their names. This does not mean that you cannot apply for a loan. Applying without having a credit history does not equate to outright rejection. Another factor that determines the status of your loan application is the company/employer that you work for. For first time applicants, financial institutions will consider the reputation of your employer.
Top banks may reject the loan application in case your company is not present in their own databases. Fintech organizations and NBFCs will also evaluate several aspects such as your company’s prior performance, current status and prospects in the future prior to granting approval for you loan. If you have ample work experience, you stand a better chance of getting a loan. 3 years of professional experience is considered good enough in this regard.
In case you are applying for loan without having any credit history, your monthly income has to be very good and should meet the eligibility criteria of the bank with regard to the amount applied for. You can try applying for a loan at the bank where you have your salary account. This will increase your chances of getting your loan approved. You should not apply for a high loan amount in case you do not have any credit history. Do not apply for a loan amount which exceeds 6 times of your monthly income initially.
The best bet is to apply for an amount which is 4 times of your monthly income. You can start building up a credit history by getting a credit card. Use this wisely and always repay in a timely manner. This will help you shore up your credit profile and score. This will also increase your chances of loan approval.