How your credit score helps in loan applications

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When you apply for a loan from a financial institution like a bank, one of the first things they want to know is your credit score or CIBIL score. They assess it to see how reliable you are as a borrower. The higher your score, the less likely the lender is to lend you. If you are looking for another way to get a loan up to ₹5 lakhs, LazyCard by LazyPay is the option for you.

Let’s start by understanding and examining how your credit score helps in loan applications and how to improve your chances of getting a loan, then explore the LazyCard as an alternative.

What is a credit score
A credit score is a numerical representation (between 300 and 850) of your credit history. It is based on information in your credit file, which is created by financial institutions and lenders such as banks and credit card businesses. The score reveals whether you’re a likely candidate to repay a loan or whether you have a history of bad checks or overspending on credit cards.

The main factors contributing to your credit score are:
● Payment history
● Amounts due
● Duration of credit history
● Type of credit

Generally, a score of 700 and above is considered ideal for granting a loan by most lenders.

How to know your credit score
You can find out your credit score from your bank. Some offer it directly on their online portal. Or you can request it with an app. Alternatively, you can request a free copy of your credit report from any of the three major credit reporting agencies – Equifax, Experian and TransUnion®

You can also check your cibil score online via the LazyPay app.

Impact of credit score on loan application
A high score, usually above 700, is generally considered good and indicates that you are a reliable borrower. This means that your credit card company will be more likely to approve you for a card and a lender will be more likely to lend you funds.
However, a low score does not necessarily mean that someone will not receive money. In fact, many people with low scores still manage to get loan approval because lenders realize they have other ways to insure against loan default (i.e. i.e., the guarantee or the co-signers).

How can you improve your credit score
If you have a decent credit rating, there is a positive chance for loan approval. If not, you can always make efforts to improve your credit score.

Considering the factors that affect credit score, here are the common ways to improve your credit:
● Track credit report
You should check your credit report frequently. Since the credit score is calculated based on your credit report, if you notice any discrepancy, you should have it rectified immediately.

Clear all contributions
A good way to start is paying off overdue credit card bills or loans. As payment history is one of the credit score factors, be sure to enable direct debit and/or payment alert options.

● Pay the credit bill on time
For all expenses with your credit card, it is advisable to reimburse them on time. Also, make sure you pay it in full and not just the minimum amount due, as it incurs late fees.

● Do not delete any old account
Delete or disable old accounts with a negative history from their credit report to make it look better. In particular, avoid getting rid of old debts once paid, as they may have a good repayment history.

● Consolidate your debts
In the case of multiple debts, a debt consolidation with your bank or credit union may come with lower interest rates. You can also explore credit card balance transfers between multiple accounts.

That said, remember that credit score cannot be improved overnight; it’s quite a long way. Always developing discipline around credit application and payments is the best place to start.

LazyCard by LazyPay for loan
A credit score is a judgment of the risk the lender has in lending to you. Traditionally, it was mandatory to have a clean credit history and a decent credit score to convince banks to grant a loan. However, its alternative – LazyCard by LazyPay is rapidly strengthening its position for its ease of integration, lack of hidden fees and low interest rates. You can apply for loan up to ₹5 lakhs directly from its app (iOS or Android). Make a smart financial decision and plan your loan with LazyPay!


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