Credit score or CIBIL score is the numerical representation of one’s credit history. The credit score or CIBIL score is sourced from credit bureaus. The score can range from 300 to 900, 300 being the lowest and 900 being the highest score.
Banks always aim to offer loans at a low rate of interest. But no matter how low of an interest rate the banks offer, the customer always wants better. What many people don’t know is that they can get loans at a lower rate of interest just by maintaining a good credit score. Yes, it’s as simple as that. Your credit score has the ability to get you loans at a lower rate of interest without any hassle.
Connection between credit score and loan eligibility
Your credit score is one of the important things banks look at when they consider your loan application. A credit score indicates your credit worthiness and your ability to repay the loan. If you have a bad credit score, the bank can reject your application right away even if you do fulfil all the other eligibility criteria. Your credit score plays a very imperative role when it comes to deciding your eligibility for a loan. Banks and financial institutions use the credit score to assess the risk posed by lending money to the applicant and to mitigate losses due to bad debt.
How can a high credit score get loans at a lower rate of interest?
Every bank has a cut off on the credit score of the applicant for the loan. The bank decides the interest rate and price of the loan depending on the risk profile of the applicant obtained from credit/CIBIL score. A customer with a low credit score will be granted a loan with a higher rate of interest while a customer with a good credit score of about 750 will be granted loan at a competitive rate of interest. The reason why the lender prices the loan high for the customer with bad credit score is because of the possibility that they might default on the loan. So it is very important to maintain a good credit score.
