Faircent Bureau In the current Indian economy, credit has played a very crucial role in fulfilling dreams on consumers such as owning a house, car, improving the house and so on. You name a requirement and there is credit available in the market to fund it. Just because someone is willing to lend, it does not mean that you can get the loan. Lending behaviour has evolved over a period of time from checking a borrower’s income to his past repayment history in form of credit score before disbursing funds. Given this scenario, a bad credit score is a crucial reason for not securing a loan.

So, if you wish to prevent a last moment rejection it might help to understand the meaning of a credit score, and how to have a good score to establish your credentials. A credit score is an indicator of a borrower’s willingness to repay the loan on time. Loan assessment by a lender is mostly driven by two factor:

1. 1. Ability to repay: That is your income and its utilization pattern

1. 2. Intention to repay: Willingness to repay loan. A higher credit score implies higher intention to repay.

The most popular credit score that comes to mind in India is CIBIL. However, there are three other credit bureaus that evaluate your credit worthiness, namely Equifax, Experian and Crif High Mark. As on date, all credit bureaus provide scores ranging from 300 to 900. An individual with no credit history has a default score of -1. The credit agencies charge a fee to let you access your score. A higher credit score is always desirable. However, different lenders have different risk appetites. 

At Faircent, we classify the borrowers into different risk buckets and we have seen lenders show interest in borrowers across entire risk spectrum. Thus, being a marketplace we allow different lenders to lend as per their risk appetite. However, if lenders are ready to offer loans despite low credit scores then they will charge a higher rate of interest to compensate for risk of repayment. Thus, the loan availed would be a costly transaction.

Many times, the lenders do not provide correct information to the credit bureau about loan repayment which can result in a bad score. To ensure that Lenders inform credit account performance across all bureaus and the score is error free, you can raise a dispute resolution with these agencies so that discrepancy in information can be rectified and your credit score  improves. This will enhance your chances of securing loan at a reduced rate of interest, thereby, saving money.