As loans create a financial obligation to repay them from future income, people should avoid taking out loans unless it is very urgent or one wants to create assets or increase income prospects. However, to obtain a loan on favorable terms at the time of the requirement, one must always maintain a healthy credit profile.
“In today’s unstable socio-economic climate, a person may need a loan at any time. Dizzying inflation, volatile market ups and downs, and add to that; post-pandemic turbulence. These factors can surely necessitate a need for credit for any person or organization that wishes to deal with such unwelcome expenses in the new normal. To qualify for credit from any fintech or NBFC company, you need to tick a few boxes. First of all, a strong credit history is essential for obtaining any form of credit now and in the future, ”said Rohit Garg, co-founder and CEO of SmartCoin.
To have a healthy credit profile, a person must have a clean credit history backed by a good credit rating.
Garg explains how a good credit history can positively affect your loan application:
- A good credit history can help volumes improve your overall credit report. If your credit score is high, you will receive low interest rates and less fees.
- A strong credit background also allows for faster processing of loan applications and credit applications. This can prove invaluable in a medical emergency or any unforeseen event.
- Your potential lenders will see you as a responsible and trustworthy borrower if you ensure that your dues are paid back on time.
- A good credit history means that you can have your preferred choice from a plethora of credit options. When it comes to getting credit loans, the luxury of choice is limited only to those with a favorable credit rating.
- A good credit history is also more desirable. A person with solid credit background will obviously be exempt from recurring callbacks and personal visits from loan collectors or legal repercussions.
On the contrary, an individual’s bad credit rating will naturally have dire consequences for them.
When to borrow and how credit scores help you borrow
Garg lists the implications of having an unhealthy credit score:
- You risk being blacklisted by loan companies and other financial institutions if you prove to be a reckless buyer or borrower.
- Unlike those with a good credit rating, your choice of credit options will be minimal.
- Any loan or credit applications you submit will be rejected due to a bad credit history riddled with unpaid EMI payments, debts, pending credit card dues, etc.
- A number of employers in all businesses follow a policy of checking an applicant’s credit history as part of the formal process. A bad credit history can dramatically reduce your chances of joining us.
- That’s not all. If you want to start your own business, bad credit is bad news. No credit company or financial firm will ever consider giving you credit.
“Therefore, having a positive and healthy credit rating is of the utmost importance. As you can see, it can literally make or break a person. Make sure you always maintain a good credit profile and follow best financial practices to stay ahead, both in your business and personal life, ”Garg said.