What are credit score?
Credit score or credit ratings are numerical image of past credit history of the borrower. For every on time loan repayment he get positive points and for loan default he get negative marks.
What is importance of credit score?
For well secured loans where lender insist borrower to put some valuable as collateral for loan, the credit score is less important. But for unsecured loan, credit history of the borrower plays vital role in risk assessment by the lender
Dependency of loan approvals on credit score
Lenders always perform a credit check of the borrower for loan underwriting. They consider better credit score for loan approval as loan amount increases. For smaller loan lender may accept poor ratings but for higher sum good credit rating is a must.
How to maintain good credit ratings?
Followings are few tips which may help in maintaining your credit score.
- Loan installment should be less than your monthly savings so that you can repay easily from your paycheque.
- If any reason you feel inability in repayment inform your lender in advance so that he may reschedule your loan.
- Unsecured loans like text loans or payday loans are very costly in terms of interest so should not be used as regular funding.