Most of them are taking the help of the loans to address some key necessities in life like purchasing a home or car or addressing the emergency.
There are different types of loans available to address the different needs of the people. Whether you are taking the loan to purchase a home or car and it can provide financial aid to tackle some emergency in life, lenders need your credit score to determine your creditworthiness before applying for the loan.
The current article lets you know why the lender looks at your credit report to determine your creditworthiness to approve the loan.
What is the benefit of having a credit score over 800
This is a great handy tool for the lender to determine the creditworthiness of the borrower before approving the loan. An impressive credit score will increase the chances of getting a loan. Here is how your credit score will determine your creditworthiness.
This is the major component of the credit report that determines your creditworthiness. If you are prompt in the repayment of EMIs and payment of the credit card bills, it will have a positive impact on the credit score, and it will surge up.
On the contrary, if there are delayed or missing payments of credit card bills or loan EMIs, it will negatively impact your credit score. By this, the lender will be able to analyze your creditworthiness in repaying the loan on time.
Un serviced debt
Due importance is given to unserviced debt when the lender is going o sanction the loan. If you chuck of unserviced debt like several loans or outstanding bills on various credit cards, it is going to impact your credit score negatively.
On the contrary, if the loans in your account are less than the income you generate and you have no credit card bills pending, you will have a positive impact on the credit score. This will let the lender know your creditworthiness as he will be able to analyze the risk of defaulting the loan before it is approved.
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Extended credit will have a positive impact on your credit score. As long as there are no dotted lines about the mismanagement of the loan, it will undoubtedly contribute to raising your credit score to more than satisfactory levels.
A credit score is also impacted by the credit mix you have. The lender needs you to have the right credit mix in different categories of credit. Though it is not going to bring a huge difference in your credit score, having the right mix under various sections of credit will long way in providing your creditworthiness to the lender when you apply for any loan in the future.
When you have good creditworthiness, the lenders are more interested in offering the loans to you. You can even get the loan at lower interest rates when your creditworthiness is good.
Credit score plays a vital role in determining your creditworthiness, which is essential for the lender to approve the loan.