When a customer approaches a lender with loan application, the lender asks for several documents that accounts for the total inflow and out flow of the funds and that is how the lender puts an estimation of the loan eligibility of a borrower but there is another very crucial document that the lender considers and on which the fate of loan application largely depends.
The document is provided by CIBIL (Credit Information Bureau (India) Ltd.) known as Credit Information Report (CIR), it accounts for all the borrowings of the applicant. The lenders that are member of CIBIL provides the details of the borrowings of the customer and that is how CIBIL prepares a detailed report of the credit history of the borrower and in turn the member lenders can access the Credit Information Report(CIR) of a borrower.
On the basis of CIR, CIBIL also prepares credit score of the borrower; it ranges from 300 to 900 points, where higher credit score establishes the higher credit worthiness of a borrower. Earlier a borrower only has access to CIR but now a customer can get his credit score by paying Rs. 450 as fee.
Credit score is far more than a number as it reflects the credit worthiness of an individual. The lenders evaluates the risk involved in a lending a customer on the basis of his credit score, sometimes a lender can even reject the loan application merely on the basis of his credit score.
On the other hand, if a borrower holds a impressive credit score then a lender can even offer him loan on a lower interest rate or a borrower can ask for some add on facilities. So, credit score is of vital importance for a customer who intends to borrow loan.
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