Pursuit of Creditworthiness

Posted by mymoneymantra on April 17th, 2018

Not everybody is born with a silver spoon! There are times when you may require funds immediately to finance your needs, but you fall short of money. You may need funds to meet various needs such as a medical emergency, business expansion, house purchase, wedding, vacation, or buying equipment, gadgets, and so forth.  

Not having sufficient money at the time of need may lead to incompletion of crucial work and extreme disappointment.

What can you do in such circumstances? Apply for a loan to fund your needs. Isn’t it? Many people Apply for a Personal Loan, Home Loan, Business Loan, and other forms of funding to meet their financial requirements.

However, availing a loan isn’t that easy. It is a journey that starts with applying for a loan and ends with getting funds disbursed to your bank account if the lender approves your loan request. And most of the loan requests get stuck at approval process.

A lot of work goes into getting a successful loan approval to analyse your creditworthiness. If you prove to be creditworthy, you are more likely to get approval for your loan. This is because lenders want to be sure that you can handle your debt comfortably and pay off the loan within the stipulated timeline.

So, how creditworthy you are? Have you ever thought how do lenders assess your creditworthiness?

Here’s what lenders look at to determine your creditworthiness:

Credit score and credit report

Your credit report is the reflection of how well you have managed your existing and previous debt. Your credit report consists of the record of your credit accounts and their repayment structure. To save their time, lenders use your credit score to determine your creditworthiness instead of reviewing your complete credit report.

Credit score is a 3-digit number provided by credit bureaus based on the analysis of your credit report. It ranges between 300 and 900.

A higher credit score (750 or above) means you are more creditworthy and capable of repaying your loan on time. Creditors and lenders will be keener to approve your loan application and offer you a low-interest rate loan rate.

You can ask banks or credit bureaus to see your credit score. There are credit reporting bodies we use are:

• TransUnion CIBIL Limited
• Equifax
• Experian
• Highmark

Income

Income doesn’t mean lenders expect you to be super rich. They look for a steady and regular source of monthly income to analyse your creditworthiness and approve your loan request.

Savings

Your saving habits show how dedicated you’re about your financial stability. Do you keep a portion of your income aside for savings or investment purpose? Or does your bank account have enough money to support you for some months in case you lose your job? If yes, you’re considered a reliable and creditworthy individual by the lender.

Assets/ Collateral

Those who do not have a high income, but may have valuable tangible assets (such as property in their name) are also considered creditworthy in the eyes of lenders. These assets will not just boost your creditworthiness but will also help you obtain secured loans, such as Home Loan at Low Rate of interest.

Relationship with Bank

When applicants approach a bank to apply for a loan, their overall relationship with the concerned bank plays a major role in determining their creditworthiness. Lenders/banks will more likely approve a loan request of the customers who have been the depositors for many years before applying for a loan. Also, if you hold investments accounts or use other fee-based services from the lending bank, it would be a plus. This holds more value if you are applying for a Business Loan.

Debt Obligations of the Borrower

Your past and present debt obligations too can make you more creditworthy. If you have paid your previous loans without a miss, banks will feel you can manage your debt efficiently. Hence, it is important to keep your debts well within your repayment capacity so that you don’t default or miss any EMI (Equated Monthly Instalment) payment.

Delinquencies in payment can make you less creditworthy and may hamper your chances of getting approval for a new Credit Card and loan.

If your credit score is below average, no need to panic! You can always improve your creditworthiness and credit score by following a few steps mentioned below:

• Keep a tab on your credit report and check it regularly for errors like data mismatch, identity mistakes, and so forth.
• Don’t load yourself with a huge debt. Reduce your debt by consolidating them or opting for balance transfer facility. Speak to mymoneymantra’s financial specialists to know how you can reduce your debt. Call us toll-free at 1800 103 4004.
• Start saving! Even if you start it with a small amount each month. Pulling out a small portion each month from your income or reducing your not-so-important monthly expenditures can help you build savings. Your savings can get you the best loan offer.

Also Read: All You Need to Know About Credit Score

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989. 

Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers.