Check your credit score before applying for that loan

Earlier, lenders had to rely on their own internal assessment of a customer before sanctioning loans or even credit cards. However, gradually the situation has changed with the availability of individual credit information through CIBIL (Credit Information Bureau India Ltd), which has enabled lenders to determine creditworthiness by dipping into this database to assess the applicant.

So the question of whether you will be sanctioned that home loan and at what interest rate would be determined by your credit score. That's why, it is important that you monitor your credit scores and purchase your credit report from CIBIL.

Elsewhere in the world if you have been rejected a loan on account of a low credit score then you have the option of approaching select lenders who specialise in lending to borrowers who have recently come out of a bad credit situation. But in India, this is not widely prevalent though there are a crop of banks that do provide loans for such individuals at very high interest rates and a lenient credit profile appraisal.

So it becomes all the more critical for you to monitor your score to ensure that your loan does not get rejected on the grounds of a poor credit score. Otherwise, you will struggle to obtain a loan when you badly need one and might end up signing for an exorbitantly expensive loan, which might be difficult to repay!

Credit Score: The basics

What does a credit score look like, and what counts as a good score?

A credit score is generally a three digit number within the range of 300 and 900. Higher the number, better is the score. This score will reflect information from several lenders and across various loans.

What information does a credit report contain?

The report contains basic information about the consumer (name, date of birth, passport number etc.), location, details of loan accounts (auto loans, home loans, personal loans and credit card), overdue accounts, highest amount of credit sanctioned in case of credit card, number of times credit report requested by the creditor along with enquiry purpose.

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