Getting fast and simple access to quick funds in the form of loans is a boon. The loans help to meet urgent financial needs while making long-term investments like a home as well. In a nutshell, a loan helps to achieve a goal. Whether you need a personal loan to pay off medical bills or for a sudden tour, a business loan to fund working capital, or a home loan to buy a home – loans come with certain criteria and paperwork.
To become eligible for a loan with competitive interest rates and favorable terms and conditions, having a good credit score is of paramount importance. A credit score above 750 denotes appreciable financial health. It enhances the chance of getting the desired loan amount on easy terms.
Why does credit score matter?
A credit score is a number that portrays the creditworthiness of a borrower. It helps the lender to evaluate the application and judge if the borrower is worthy to get the loan. A credit score reflects a person’s credit history and assesses how responsible the person is in dealing with previous credit. The score is the summation of the borrower’s credibility which is judged by on-time repayment of the EMIs, credit inquiries, current debts, and credit utilization. A good credit score assures the lender that the borrower is financially in a stable condition and responsible disciplined in terms of credit. However, it is not the only criterion to qualify for a loan.
What are the ideal credit scores for different loans?
The credit score needed is different for different types of loans. Here is a brief discussion:
Although you will get a loan even if your score is low, you should be aware of the matter that your credit score will be considered while sanctioning the loan. With a low score, you may have the chance of rejection.
Summary – Having a good credit score is needed to apply for any loan. For unsecured loans, a credit score between 720 and 750 is ideal.
Saptarshi Roy Bardhan