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The personal and business loan lending eligibility criteria differ from one lender to another. But each lender evaluates the creditworthiness of borrowers based on their credit scores. When you apply for a personal or business loan, the lender will use your credit score as the primary criterion to decide about approving or rejecting the loan application. Most lenders nowadays extend unsecured credit only to borrowers who have excellent credit scores. Likewise, many lenders provide credit at higher interest rate if the borrower has a low credit score.
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The personal and business loan lending eligibility criteria differ from one lender to another. But each lender evaluates the creditworthiness of borrowers based on their credit scores. When you apply for a personal or business loan, the lender will use your credit score as the primary criterion to decide about approving or rejecting the loan application. Most lenders nowadays extend unsecured credit only to borrowers who have excellent credit scores. Likewise, many lenders provide credit at higher interest rate if the borrower has a low credit score. • • •
• In addition to becoming the deciding factor in credit approval, your personal credit score will also impact the loan interest rate. • You must remember that your past financial behavior will affect your personal score directly. For instance, your personal credit score will fall if you have too many loans/credit cards, do not pay credit card bills or loan installments on time, or use a large percentage of your credit limit. • You should always be financially aware and know how to maintain and improve your credit score, so that you dont face any problems in availing personal or unsecured business loans in future.
Pay your loans and credit cards on time You can easily maintain a good credit score by paying your credit card bills and loan EMIs on time. If you are finding it difficult to repay the current loan EMI, approach the lender to restructure the loan. Likewise, you must pay the credit card bill in full instead of paying the minimum amount due. The timely repayment of loans and credit card bills will help you to maintain a good credit score in the long run.
Explore ways to reduce borrowing You must remember that your credit hungry behaviour will impact your personal credit score directly and adversely. You must explore ways to avoid borrowing additional funds to improve the credit score. It is always a good idea to keep a portion of your credit card limits unutilized. Also, you must not apply for a secured or unsecured loan if you are not in dire need of funds.
Don’t settle loans or credit card dues Many borrowers settle their credit cards or personal loans to save money. Each time a borrower settles a loan or credit card, he does not pay the actual amount due to the lender fully. But the settlement often affects the lender’s personal credit score in both short and long runs. Many lenders even do not extend credit to a borrower who has settled loans or credit card dues in past.
Combine secured and unsecured loans You can meet your financial needs through either secured loans or unsecured loans. But your credit score will be impacted adversely of you took too many unsecured loans. You can easily maintain a good credit score by combining secured and unsecured loans. Instead of taking too many credit cards or personal loans, you can consider availing secured loans like vehicle loans and home loans.
Avoid applying for loans frequently You must remember that each time a borrower applies for a loan or credit cards the inquiry made by the lender is recorded in his credit report. Hence, you can easily improve your credit score by not apply for loans or credit cards at frequent intervals. Likewise, you must not apply for credit to a new lender immediately after your loan request being rejected by another lender. It is always a good idea to wait for some days before reapplying for credit.
