Loan Application Process
Once you have applied for a loan, the lender gets your credit report from one of the credit bureaus. The main reason for checking the credit report is to ensure that all payments have been made on time. In case your payment record is bad, your application may be rejected or delayed. Apart from loans, the same process is followed for credit card applications as well.
Factors that Influence the Credit Score
Some of the main factors that affect the credit score are mentioned below:
Credit History Length:
- The average of the oldest credit account and the newest credit account plays a vital role in determining the credit score. In case your credit history is long, your credit score will be high.
- Applying for loans or credit cards from different lenders in a short span of time will affect your credit score in a negative way. The credit score will be affected in a bigger way if you have a short credit history.
Types of Accounts:
- Your credit score will be influenced depending on the different types of accounts such as retail loans, retail accounts, or credit cards.
Amount that is Owed:
- The amount of credit that is available to you and the amount that you owe to lenders from your different accounts plays an important role in determining the credit score.
- It is vital that you pay all the bills on time. Any late or missed payments will lower the credit score. Lenders look into your payment history when providing a loan as it can determine whether you can repay the loan.
Ways to Maintain a Good Credit Score:
The different ways by which you can maintain a good credit score are mentioned below:
- Ensure that you make all your loan payments and credit card payments on time. In case your credit score is bad, making payments on time will improve it.
- Your credit utilisation ratio plays a vital role in determining the credit score. The credit score will be stable if the ratio is 30%.
- Ensure to check if you are eligible for the loan before you apply for it. This can ensure that your loan application will not be rejected as well. Any rejection in the application will lower the credit score.
- Taking multiple loans at the same time will lower your credit score. Therefore, it is important that you take one loan at a time.
CIBIL records any loan requests and credit enquiries. Therefore, making several requests or enquiries could affect your credit score. It is important that all your payments are made on time as it could help you to get a loan or credit card in the future.