How important is your repayment history when you apply for an instant personal loan in India

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You’d have often heard of lenders conveying a minimum credit score requirement for personal loans in India. For unsecured loans, the minimum credit score that’s often required is 700-750 in case you choose to apply with a top private bank. When we say top private bank, we mean the popular ones that don’t include state-run banks, and offer both secured and unsecured credit to salaried as well as self-employed individuals.

If you’re looking for an instant loan in India, you’re looking not at top private banks, but Fintech lending companies who have tied-up with top private banks and offer instant loans to salaried individuals who meet a minimum income and credit score criterion.  Your credit score is obtained from your credit report and reflects how you’ve managed your credit ever since you applied for your first credit product. Whatever be the form of credit you’ve applied for, you can count on your credit score and repayment history to get approved for any loan.

Your repayment history is essentially a record of repayments that you’ve made ever since you applied for your fest credit product. Along with your credit score, lenders will look at your repayment history to understand what sort of credit management behaviour you’ve exhibited in the past. If you’ve made late payments on your credit card or loan accounts, the same will reflect in your repayment history, which has a direct impact on your credit score. So if you want to get instant loan approval when you apply, you should make sure your credit score is right up there, and your repayment history doesn’t have too many instances of late payments or defaults. In the case of defaults, even a single instance of default can have a severe impact on your approval chances, and lenders will almost certainly reject your application. A delinquency of over 30 days on any credit product is often considered a default. While any form of default has an adverse impact on your credit score, home loan defaults are often considered most severe, and even a single instance of default can bring down your credit score by at least 50 points.

Does your repayment history impact your credit score?

Well, whether you apply for an instant loan or any other type of credit, your repayment history has a significant impact on your credit score. As such, your repayment history contributes to about 35% of the total weightage on your credit score, along with other parameters like the length of your credit history, number of credit accounts and types of credit that make for the remaining 65%. Lenders send information about your repayments to the bureau which is reflected in your credit report. Checking your credit report on a regular basis will help you know what has been reported, and you can accordingly highlight any errors that may be present in your report.

More importantly, your repayment history not only influences approval or rejection, it also determines the interest rate you’re offered. Having a clean repayment history and a good credit score will prompt lenders to offer you the most competitive rates in the market.