A credit score is the numeric summary of an individual’s credit history, mainly issued by the credit agency CIBIL. It is a three-digit number that ranges between 300 (poor) and 900 (excellent) in India. Lending institutions primarily use this credit score to decide on a loan application approval or rejection. Such rejections impact the credit score negatively. It would be best if individuals could keep their creditworthiness sound to avoid loan rejection conditions.
Generally, most lending institutions approve a loan with a credit score of 650+. If a lender approves a loan application with a low credit score, it tends to have a high risk of default. Therefore, lenders tend to reject the application. However, there is still a possibility that the loan can be approved. If an individual meets the lender’s defined loan eligibility criteria, a lender can offer a gold loan at a high-interest rate.
Factors that affect Credit Score:
- Credit utilisation ratio
An individual needs to keep the credit utilisation ratio in control. Since credit history is required for loan approval, there should be some debts that an individual is liable to pay on time. But you must not utilise all your credit limits. Ideally, it should be between 10% and 30% of the available credit.
- Delayed EMI
An individual’s repayment behaviour impacts the credit score. It is inevitable that a borrower will pay the loan EMIs on time. Even a single missed or late EMI will decrease the credit score and will be shown in the credit history even after the loan has been repaid.
- Errors in a credit report
If there is any clerical error, typographical error or administrative error, it will impact the credit score. It must be rectified as soon as possible.
How Gold Loan can improve credit score
There are many ways to help borrowers build a sound credit history and increase their credit score. A gold loan can also help improve the credit score since it is an easy loan with minimal eligibility conditions.
What is a gold loan: A gold loan is a secured loan. Lending institutions do not ask for a high credit score to approve a loan. Just pledge your gold to get funds credited to the account.
The lender checks for the purity of pledged gold, and the loan will be sanctioned easily. It can be repaid in easy repayment tenure. There is an option for payment of the interest-only and pay the loan amount at the end of the loan tenure.
Such easy loans can be repaid easily without skipping any EMI. It adds to an individual’s creditworthiness and increases credit score with a good credit history.
Advantages of High Credit Score
A high credit score supports the borrowers in the following way:
- A high credit score brings quick consent to the loan application and higher odds of a loan sanction.
- Lenders offer a low gold loan interest rate to a borrower who has maintained a high credit score. A high credit score signifies high creditworthiness, and there is less risk of default on loan repayment comparatively.
- Since an individual has proved sound creditworthiness by maintaining a high credit score, a lender can approve a high loan amount for these applicants.
- Generally, lenders offer pre-approved loan offers to individuals with a high credit score that can be utilised to get faster loan disbursal.
- Good credit history and score increase the negotiating power of the borrower regarding gold loan interest rate, repayment and other terms.
Quick gold loan application procedure
- Go to the official website of the lending institution. Borrowers can apply through the lender’s mobile application also.
- Access the online gold loan application and enter the applicant’s basic details. It will also ask for information about the gold to be pledged.
- An individual can choose from different gold loan schemes. Choose one that fits your needs regarding loan repayment conditions and loan amount, and submit the details.
- It is best to use the gold loan calculator available on the lender’s official website for free. It helps borrowers determine loan eligibility and applicable EMIs under different loan tenure and schemes.
- Visit the nearest branch of the lending institution to complete the easy gold evaluation. The applicant needs to submit the primary KYC documents.
Thus, any individual can fulfil sudden or planned financial needs with easy gold loans and positively add to the credit score.