Are you planning to buy a new house on loan? Or, are you planning to go study abroad and need a student loan? Or are you examining your finance possibilities because you have your heart set on your dream car? Whatever the occasion, attaining a significant life milestone is an important accomplishment that merits a celebration. However, before you can enjoy your new home, car, or international migration, you must figure out how to pay for these expenses.
In these scenarios, taking a loan is a very popular practice that people tend to follow. Therefore, to determine your chances of receiving a loan before applying, you should check your credit score. Hence, here’s a rundown of reasons why you should do a credit score check before applying for a loan.
What is a Credit Score Check?
Did you know you have a financial attribute known as creditworthiness that lenders look for before granting you a loan? Your creditworthiness basically refers to your capacity to repay the loan principal plus applicable interest on the same. This is largely influenced by your credit score that is affected by your credit history, which includes any pending debts, payment of bills, credit card payments and the like.
The range of your credit score lies between 300 to 850. It is important to note that you will be eligible to get a loan if your credit score is closer to 850. For instance, if you have a good record of paying your credit card bills on time then you might have a good credit score.
Why Credit Score Check Before Loan Application?
Not everyone is qualified to be granted a loan from the bank. Wonder why that is? Well, the answer is simple, a low credit score can diminish all your chances at getting a loan from a bank. So casually applying for a loan and waiting to hear positive news is the wrong way to go about it. Thus, to avoid making any mistakes while applying for a loan, it is essential to know your credit score first. Ergo, here is a rundown of the reasons why you should do a credit score check before submitting a loan application.
- Know your Options: In case you have a low credit score then your chances at getting a loan from a bank or any other financial institutions are very slim. Thus, if you do a credit score check through CIBIL you can be prepared with other options to get money for your endeavors. For this purpose, it is suggested to use a financial calculator and stay in charge of the situation.
- Be sure of Loan Approval: If you make sure to do a credit score check before submitting your loan application, you won’t have to wait for the bank’s verdict to decide your next course of action. In case of a low credit score, you won’t have to go through the hassle of applying for a loan and feeling dejected upon its disapproval. On the other hand, if you have a high credit score conducted by the credit bureaus, then you need not worry for loan approval since it will be a quick and easy process for you.
- Lower Interest Rates: Interest rates levied on the loans can be intimidating for some. However, people with high credit scores can easily get loan approvals with lower interest rates. It will also differ from one bank to the other since they have their own interest rates for particular loans.
- Negotiation isn’t Out of the Question: A good credit score check can open many doors for you. It is a key to financial bliss. Thus, if you are aware of your good credit score beforehand then you can easily negotiate the certain terms of loans and save money!
- Avoid Loan Rejections: One of the most important reasons why you should do a credit score check before submitting your loan application is that frequent rejections of your loan applications by banks or financial institutions can negatively impact your credit score. In simpler terms, if you blindly keep applying for loans without conducting a credit score check first and suffer one rejection after another then you will contribute to lowering your credit score. However, you can do a credit score check online without impacting it in any way. Furthermore, you can use a financial calculator to know your creditworthiness and find personalized offers from banks to take loans.
Before applying for loans, it is crucial to do a credit score check because it will save you time by determining whether you qualify for a loan given your credit score. Additionally, if you have a high credit score, you will be able to negotiate loan terms and save money by paying lower interest rates on your loan. The most important thing to remember is that doing a credit score check will not bring it down. It will only help you enhance it by developing healthy financial habits.