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WHAT ARE THE PITFALLS OF IGNORING THE CREDIT SCORE?


Nowadays, our daily lives are increasingly dependent on credit solutions which are used for wide variety of personal and business need as many banks and NBFCs offer numerous loan schemes to entice their customers. There is an army of people who "Apply For Loan" to fund their needs and to get rid of financial crunch.

A good credit score is the key thing to avail any kind of loan and score between 750-900 can help you in numerous ways. Therefore, ignoring the most significant component of this lending process can leave you high and dry. In this blog post, we will discuss about the pitfalls of ignoring the credit score and how badly it stings you. Let’s find out these setbacks:

  • Limited choice of lenders: Most of the lenders prefer to sanction loans only to those who have a credit rating of above 750 as it considered being a good score in the lending sector. Any individual whose credit rating is poor would be considered as someone who is not disciplines with his repayments and this lowers his/her chances to get loans from the reputed lenders for financial aid.
  • High interest rate: A bad credit history can ruin your chances of getting the loans. In case, you get enable to secure a loan but low credit score results in high loan cost in terms of interest rates as the lending institution would charge you higher rate of interest on the loan resulting in increased debt burden. However, someone with a good credit score doesn’t need to worry about high ratio interest rate.
  • Little or zero negotiation power: It would be great drawback of having a poor credit history as it destroys the chances of negotiation on interest rates with lenders and you may end up in accepting the terms imposed by the lender. A person having high CIBIL has variety of options and he/she is in a better situation to bargain over the interest rate and other terms and conditions.
  • Cap on the loan amount: Well, poor credit rating reflects you as a bad borrower who is not regular with his repayments or EMIs. This thing puts the lender in risk to trust you with higher loan quantum. Hence, you might end up getting the lower amount or in case, you get succeeded in securing desired amount then you would be charged with higher rate of interest.
  • Higher insurance rate: It is an important thing to keep in mind that every insurance company checks the credit history of their customer to know the risk of default by the applicant. It is very common among insurance firms to charge people with higher insurance premiums with a low credit score.

So, it’s some of the common pitfalls one can face with poor credit rating therefore it is really important to maintain your credit score by repaying timely. If you are someone who is in dire need of financial aid or want to have credit card, look upon these factors to avoid any rejection when you "Apply For Loan Online" or offline. At the end, it is advisable to maintain a healthy credit score.


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