Loan Eligibility Directly Affected by Credit Score
Regardless of how much income one happens to have, all banks and financial institutions base their loan eligibility criteria on certain important factors as informed by the Credit Information Bureau Limited (CIBIL) of India. All details of a borrower’s loan and credit card, are shared by the bank with CIBIL, which in turn shares this information with other banks when an individual applies for loans, credit cards or overdraft payments.
Despite low income, the meticulousness with which the individual makes payment can result in higher amount of loan generated by the bank. Banks and financial institutions have their foolproof ways of detecting the eligibility of borrowers, and tracking down their repayment capacity.
Internal policies of loans is the basis of loan eligibility, while credit history, and payment track record have little or nothing to do with it. As a result, the loan applications of potential borrowers having a low credit score will not be given much priority.
The responsibility of calculating one’s payment track record and credit history is vested with CIBIL, however the loan procedure for first time borrowers will not be impacted by this criteria as they have a clean slate.
Many factors such as credit taken from the market, details of past due accounts, reasons for credit applications being declined, the age of applicant’s line of credit, and the overall credit profile influence the potential borrower’s credit score. This score is also used by banks to determine the individual’s repayment capacity.
By filling an online form and paying a nominal fee on the website, CIBIL generated credit scores should be checked every once in three to six months in order to be aware of current banking position. Diligent methods of maintaining accounts, making the minimum payment before due dates, limited and wise use of credit card, and seeking clarity from the concerned department of the bank incase of a discrepancy would result in an increased credit score, and hence greater loan eligibility.
Source: Yahoo! Finance
