When it comes to healthy financial practices, you cannot ignore the importance of credit scores. Especially when it comes to applying for a personal loan, a good credit score increases your chances of approval and securing a favourable rate of interest. In this article, we explore the advantages of cultivating a good Experian score.
What is an Experian credit score?
Experian, a credit bureau licensed by the Reserve Bank of India (RBI), ranks individuals for their creditworthiness. Credit scores are calculated after a thorough analysis of credit usage, length of loan history, financial decisions, re-payment history, credit mix, and other factors. They range from a numerical figure of 300 to 850.
An Experian score of 650 and above is considered a good score. This signals low risk for lenders, which translates to an increased chance of getting a personal loan on favourable terms for borrowers.
Additional Read: 5 Things You Need to Know about Experian Credit Score
Advantages of a good credit score
While loan eligibility criteria set by most lenders are easy to meet, credit scores can make all the difference in final loan approval. If you have a good score, you have higher chances of qualifying for a loan. This is because a good credit score allows lenders to trust your repayment capacity.
Chances of approval for higher limits
Your borrowing capacity has a lot to do with your income level and credit history. A high credit score makes you eligible for loans of higher limits. Lenders validate your old records and loan histories before lending the amount; credit scores are a crucial factor they consider when making this decision. If you have a good score, you can negotiate a higher loan amount with greater ease.
Competitive interest rate
Lenders use credit scores to determine the interest rates at which they lend money – this varies from borrower to borrower. In most cases, lower personal loan interest rates are offered to borrowers with high credit scores. A good score also puts you in a better position to negotiate interest rates with your lender.
Options and negotiating power
Lenders view high scores favourably and are, thus, more open to negotiating loan terms. With better credit scores, an individual can ask for lower rates, extra facilities, mode and time of receiving loan amount, etc.
Moreover, you can also compare different lenders for favourable rates or loan terms before making a final decision. A good Experian score, thus, allows you more options in terms of lenders. This means you can pick one that meets your requirements adequately.
Additional Read: 5 Habits to Have to Get yourself in the above 800 Credit Score Club
Credit scores play a significant role in lending decisions. Thus, it is important you maintain a good credit score to secure the most attractive loans.
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Use our free online personal loan EMI calculator today to understand your monthly payments. Visit our website to learn more.