The Anatomy Of a Credit Score!

Anatomy of Credit Score

How exactly does applying for a loan affect the credit score

 Are you availing of an instant personal loan or investing in a property? This article will help you analyze the anatomy of a credit score to carry the extra benefits while availing of an instant personal loan.

Let’s understand what exactly is a credit score? It is a numerical range/scale that grades your financial behaviour. Credit score often appears in the form of a 3-digit number that varies between 300-900. By financial behaviour we mean, how you repay your loan amount on or before the due date.

Buddy Loan, which is one of the biggest loan aggregators in India disburses instant personal loans with enormous benefits. Enhance your credit with Buddy Loan by availing of an instant personal loan on the go.

Read more: Medical Loan: Credit Score Vs Foreclosure!

“The average credit score”

So, with the help of this score, you can earn the trustworthiness of the financial institution, NBFC or the lender himself. It is one of the factors they look into before lending you a loan to check your creditworthiness.

Banks, lenders and other institutions prefer credit score on an average of 750. One can avail good benefits making way for loans that have low interest rate and high value. There are many factors that influence your financial behaviour such as on-time payment, prepayment, and one-shot payment.

Improve Credit Score

Be it any loan such as secured to unsecured, medical to travel and all personal loans embrace one governing choice, credit score. Credit score allotment over the years have a way of presenting before the lender or the financial institution, the collective credit score of the individual years are called credit reports.

Credit score: 300 – 600

300, is actually a below-average score that sets the creditworthiness to the negative end of credit. It signifies the former behaviour with the payment and concludes that you have had problems paying back your loan on time. A deeper study reveals that score 300 is almost the stage of bankruptcy or home foreclosed.

Credit score: 600 – 750

Though 600 stands below average, it is still considered as lendable. For financial institutions, banks, NBFCs and small lenders this score is considered between good and bad score. You can still find lenders for loans and credit cards with a score of 600. However, carrying the same behaviour or attitude will not help you benefit much from credit score.

Credit score: 750 – 850

Managing a number like 750 between the financial challenges is not just an average score but close to excellent. It could help the lenders and credit card institutions assess you through the quick sanctions. But more often, the amount of money that has a direct impact on your credit score.

 The calculation of loan amount and its impact:

There are ample factors that affect your loan amount. However, a credit score is a direct impact before your loan approval is granted. Credit score can either help or affect your instant personal loan. Buddy Loan is one of the loan aggregators that will help you enhance your credit score with vivid repayment options.

Your financial behaviour will chain your financial plans to help build a credit score. Here are some key factors you will have to consider before availing of an instant personal loan.

Income liquidity: This factor can assess your capacity to repay an instant personal loan. It is one of the assurances you can give your lender for repayment.

Age: It is important you are under the brackets of this eligibility criteria to avail of a personal loan easily. If your age exceeds the criteria, your loans will be easily rejected.

Job instability: If you are repeatedly changing jobs it could be difficult and can even reject your financial institution.

Read more: 10 honest facts about credit scores everyone should know!   

With all the primary factors affecting your loan approval, let us understand how exactly availing a loan affects your loan approval.

  • Nobody wants to have a bad credit score before lending a loan. Any default I payments, check bounces, etc can easily push you to the least end of your credit score.
  • In such cases, there are high chances of your loan application getting rejected.
  • The lower the EMI, the longer the tenure. But your payments are spread across the full tenure which will help you if you’re drawing a low salary. It will increase your credit scores.
  • Financial bodies and credit brokers sort the loan application by having a record of it. They would assess your application with history and either decline or approve the loan application.
  • It is advisable to apply for a loan only when in dire need than overusing it for unnecessary or small reasons.

Buddy Loan offers disburses loans starting from Rs. 10000 to Rs.15 lakhs.

How exactly does applying for a loan affect the credit score?

By now, you know that availing of any personal loan will affect your credit score. If you avail a loan with outstanding debt at hand, you’re in a soup.

Credit scores and their’ agencies list your financial activity. Hence, healthy financial behaviour is always recommended.

It is like your overall average wouldn’t make a big difference with a new loan all at once. So, it is a journey of years that can create a good credit score. Paying on time, no bounces, and of course not defaulting the last EMI.

Thus, the impact of a new loan will be less on the credit score. The easiest and best way to keep a personal loan from lowering your credit score is to make your payments on time and within the tenure of the loan stated.

Read more: The Story Of A Man Who Made It To 750 Credit Score

Loan tenure vs credit score: 

Undergrads and graduates often find it confusing to avail a personal loan based on the options available. As a student, with all the chaos of loan sanctions, visa approval, university admission and more we forget the primary objective.

We lose focus on primary benefits that play out a large role in repayment, like your interest rate, tenure, customized EMI options. We ought to compare the interest rates in banks and apply for a personal loan. But note that many instant personal loans do have an extension date you have pledged an asset.

Buddy Loan which is one of the biggest loan aggregators disburses loans at lower interest rates starting at 11.99%p.a. Further, it courses your approval based out on credit score and repayment capability. You can avail of different options on EMI too.

The tenure of a personal loan:

Acknowledge that the tenure is indirectly proportional to your EMI. The lower the EMI the longer the tenure. This has a precession in planning your financial behaviour besides pursuing your masters or any education, overseas.

Buddy Loan App offers loan tenure starting from 3 months to 60 months i.e. 5 years, complimenting your EMI option.

Many of the personal loans have a tenure that extends over 5 years. But there is a con to this option as your interest rate increases tremendously. A personal loan or any personal loan has factors such as interest rate and tenure you could balance and enhance your credit score.

The personal loan covers the expenses listed:

The loan amount will cover a large number of expenses listed by the norms,

  • It will cover your tuition fees and hostel fees.
  • Covers the travel expenses for students who wish to study abroad.
  • Covers your insurance too.
  • Material cost such as your books, equipment, uniforms, etc.
  • It includes examination, lab fees, etc
  • Inclusive of your gadgets like laptop, mac book, other accessories.

It is further divisible into deposit funds, small fees required to complete the course like study tours, thesis, industrial visits, projects, etc.

The ideal repayment time for a personal loan to maintain your credit score:

It could vary anything between 3 months to 5 years is ideal, the earlier the better. Your credit score totally enhances base on the EMI amount and interest rate.

However, for abroad personal loans, the tenure is around 10 years and can be extended on the basis of the borrower. Please note, this will hinder the credit score in the long run and passively affecting your work-life balance.