The Importance of Credit Score in Loan Approvals

• BY: IFFCO Kisan Finance
• Dec 27, 2024

In today’s financial landscape, securing a loan can be a stepping stone to achieving dreams whether it’s purchasing a home, expanding a business, or investing in modern agricultural equipment. However, one critical factor often determines whether your loan application sails through or hits a roadblock: Your Credit Score.

What is a Credit Score?

A credit score is a three-digit number that reflects your creditworthiness. Derived from your credit history, it indicates how responsibly you’ve managed your financial obligations in the past. Credit scores typically range between 300 and 900, with a higher score signaling better financial discipline.

A Credit Score is determined based on the following factors:

• Payment history: Timely repayment of loan installments and credit card payments will help improve your credit score.
• Credit Utilization: The proportion or percentage of the credit availed as opposed to the credit limit available.
• Length of credit history: A longer credit history will contribute to a better credit score.
• Credit Mix: Using a mix of different credit types such as credit cards and installment loans, can enhance a credit profile.
• New credit inquiries: Frequent applications for new credit can negatively affect the score.

The Credit score ranges are typically categorized as follows:

• Excellent (750-900): Strong eligibility for loan approval with attractive terms.
• Good (700-749): Good chances of approval with fair interest rates.
• Fair (650-699): Loan approval is possible with reasonable terms.
• Poor (300-649): Limited loan options with alternative solutions available.

Why Does Credit Score Matter for Loan Approval?

Lenders, including banks and NBFCs (Non-Banking Financial Companies) like IFFCO Kisan Finance Limited, rely heavily on credit scores to assess the risk associated with lending to an individual. A higher credit score will mean the borrower has good and responsible financial behavior. The lenders see this as a less risky option.

Here are some key reasons why your credit score is crucial:

• Eligibility: A good credit score can help you increase the chances of getting a loan.
• Interest rates: A higher credit score will ensure a lower rate of interest. That should help you reduce the overall borrowing costs associated.
• Approval speed: A stronger credit score will ensure that the loans are sanctioned instantly or within a shorter time period.
• Loan amounts: If you have a higher credit score, you have the option for a better and higher loan amount.

A lower credit score can work exactly opposite to these scenarios. You may fail to get the loans or get them at a very high rate of interest. For loan seekers, this can hinder access to critical funds needed for operations and growth.

Steps to Improve Your Credit Score

Improving your credit score is not a one-day affair. It will need to take proactive steps over a period. We recommend using strategic planning to help increase your credit score.

Here is how to Improve Your credit score:

• Pay your bills on time: Timely payments of loans, credit cards, and other financial obligations will ensure improving the Credit score overall.
• Reduce credit utilization: Use less than 30% of your credit limit. This will help you keep a good credit score.
• Check Your Credit Report for Errors: Regularly check your credit score and credit reports. If you find any inaccuracies, report them immediately.
• Diversify your credit types: Use a mix of revolving credit. These can include credit cards and repayment loans.
• Keep old accounts open: A longer credit history will help you in improving your credit score.
• Avoid new credit inquiries: Limit the number of new credit applications to maintain your score.

How Does IFFCO Kisan Finance Help You Access Loans?

We at IFFCO Kisan Finance, understand the unique challenges of the farmers, MSMEs and supply chains and offer the best possible loan options to support their financial betterment.

Our offerings:

• Flexible EMI Options: Enjoy customized EMI plans tailored to your income, making repayments more manageable and convenient.
• Quick Loan Approvals: Experience fast-track loan approvals with our streamlined process, getting you the funds you need without unnecessary delays.
• Easy Documentation: Simplify your application with our easy approval process, making it quick and hassle-free.
• Flexible Repayment Options: Loans from IFFCO Kisan Finance come with flexible repayment plans tailored to your cash flow. This ensures you can repay the loan without undue financial pressure
• Corporate Solutions: At IFFCO Kisan Finance Limited, we offer corporate financial solutions designed to meet the diverse needs of businesses and entrepreneurs.

By choosing IFFCO Kisan Finance, you gain a reliable financial partner dedicated to your financial success.

Conclusion

Your credit score is more than just a number; it’s a reflection of your financial health and discipline. Whether you’re a farmer seeking a tractor loan or an entrepreneur planning to expand your MSME, maintaining a good credit score can open the doors to better financial opportunities. Take charge of your credit today, and set yourself up for a financially secure future.

Contact Us:

• Email: care@kisanfinance.com
• Website: www.iffcokisanfinance.com
• Phone: 0124698 7700