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The Role of Credit Score at Different Stages of Credit Lifecycle

Highlights

  • Lenders consider credit score at various stages of the credit lifecycle
  • These include the time when you apply for a fresh loan, request for a balance transfer facility, etc. - Read this post to know more

When disbursing a loan or issuing a credit card, lenders check the background of applicants to assess their eligibility for credits. They check their income, workplace, age, and a whole lot of stuff. But the first thing they see is their credit score, which tells how good the applicants have been in their credit life. A good score creates a nice impression and applicants get the nod for the credit they look for.

The role of score does not stop at the time of fresh credit, it comes into the picture even when you look for a balance transfer. Sometimes a good credit score can even enable a credit you may not apply for. We will tell you all these in detail here. So, keep reading!

What is a Good Credit Score That Enables Credits for You?

Credit bureaus such as CIBIL and Experian assign credit scores to individuals based on their repayment track. The score comes in the range of 300 to 900 in India. A good score is 750 and above and ensures all the credits such as personal loans, car loans, credit cards, etc. A home loan can be approved without a credit score, but it will play its part in deciding the interest rate.

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A good score comes with credit discipline that you maintain for a long time. So, if you have any loan or credit card, keep paying the EMI/bill on time. This will ensure a good score for you and seamless approval for credits in the future.  Let’s talk about the role of credit score at various stages for different credits.

The Role of Credit Score During a Fresh Personal Loan Application

When a fresh personal loan application comes, the lender will not only check your credit score but also the overall repayment track. As personal loans are unsecured credits, a good score will make lenders confident of lending to individuals having the same. Not only do you get an impressive loan amount, but even the interest rate remains lower. Let’s check the best personal loan deals based on your credit score and income.

LendersMaximum Loan Amount (In INR)Interest Rate (In Per Annum)
State Bank of India (SBI)20 Lakh9.60% - 13.60%
HDFC BankNo Limit, it depends on your income, credit score and repayment potential10.40% - 17.00%
ICICI Bank40 Lakh10.75% - 17.50%
Bajaj Finserv20 Lakh14.00% - 16.00%
YES BANK50 Lakh10.70% Onwards
Kotak Mahindra Bank20 Lakh10.75% Onwards
Fullerton India20 Lakh12.00% - 25.00%

How Will a Good Credit Score Help Someone Applying for a Home Loan?

As told above, lenders can approve a home loan even without a credit score. The reason being a home loan comes with an equitable mortgage of the property you buy. If you don’t pay your home loan EMI for 6-7 months in a row, the lender can sell the property to recover the dues. However, a good credit score will ensure the best home loan interest rates for you. Lenders can decide the score criteria for offering the best interest rate. Here’s a look at the best rate based on credit scores.

What About Someone Applying for a Credit Card with a Good Score?

If you have a credit score of 750 and above, you can get the best credit card offering a wide range of discounts, cashback and rewards. Moreover, you will most likely have impressive credit limits, helping you shop more.

The Role of Good Score When it Comes to a Personal Loan Balance Transfer

You need to have a good credit score when switching your existing personal loan to another lender at a lower interest rate. This is called a personal loan balance transfer, which is like a new loan for the new lender. So, it will do all the verification including a credit score check. Most likely, individuals with a score of 750 and above will get the nod for such a facility. Lenders can approve the balance transfer for people with a score of around 700. But then, the interest rate won’t be that lower as you could get when the score reads 750 and above.

Further, with a good score, you can get a pre-approved personal loan from the bank where you have a credit card or any loan. The best part is that you don’t need to apply for it.

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How Can a Good Score Help a Smooth Processing of Home Loan Balance Transfer?

Balance transfer happens mostly in home loans because of the extended time you get to pay the same. A home loan can run for upto 30 years, so you can have multiple opportunities to reduce your cost using the balance transfer. A credit score may not hold relevance to home loan approval but is vital to get the nod for a balance transfer. A home loan balance transfer will require a good score. So, keep paying your existing home loan EMIs and other debts, if any, on time to ensure the same.

What Role the Score Will Play in a Credit Card Balance Transfer?

If you pay the credit card bill in full and on time, there won’t be any interest. But if you pay the bill partly, the interest will apply, and that too at 2.50-3.50% per month. Annually, it would accumulate to 30-45%, which is not warranted if you care for money.

But if you have revolved the credit card debt like this, you could transfer the outstanding balance to another bank credit at a lower rate. This will reduce the burden. You can get a grace period of 45-60 days to pay the credit card dues. The balance transfer can also happen in the form of EMI.

All these will be possible only if you have a good credit score. Stuff like credit card upgrades, credit limit enhancement can also happen based on a good score and a smooth repayment track.

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Personal Loan Interest Rates July 2021
Fullerton India14.00% - 24.00%
HDFC Bank10.75% - 21.45%
ICICI Bank10.75% - 17.50%
IndusInd Bank11.00% - 23.00%
Kotak Bank10.75%
RBL17.50% - 26.00%
Standard Chartered Bank11.00% - 12.50%
Tata Capital10.99% - 19.75%
Home Loan Interest Rates July 2021
Axis Bank6.90% - 8.55%
Bank of Baroda6.75% - 8.25%
Citibank6.65% - 7.40%
HDFC6.75% - 8.00%
ICICI Bank6.75% - 7.55%
Indiabulls Housing Finance Limited8.65%
Kotak Bank6.65% - 7.30%
LIC Housing6.66% - 7.90%
Piramal Capital & Housing Finance9.65%
PNB Housing Finance7.35% - 9.05%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI6.70% - 7.30%
Tata Capital6.90% - 8.75%