Are you looking for an instant Business loan? Then you must be aware of your credit score. Business is not just about sheer hard work; it also requires the right investment at the right time. When an opportunity comes, it will not wait endlessly. Ensuring the business has enough funds to make full use of any opportunity is a must at that point. You can either use revenue or savings to utilize the opportunity or else you can take a loan to meet the business requirements.
But, what many businesses do not realize that they must meet the lending institution’s criteria. Many criteria are looked at, and one of the most important ones is the credit score.
Understanding the Credit Score
In India, the most popular credit score is the CIBIL score. CIBIL, which stands for Credit Information Bureau India Limited, maintains the record of the borrower’s credit related activity. It publishes the Credit Information Report or CIR, which is made available to lenders to assess the borrower’s financial behavior and creditworthiness.
A score is a three-digit number ranging from 300 to 900. Generally, a score of 700 is considered good and increases your chances of getting the loan.
But, many people do not focus on maintaining a good credit score. It is easy to believe since a loan is not required currently, it is okay to ignore ratings given by credit bureaus. This approach and thinking can backfire in the long run.
Reasons to Maintain Good Credit Score:
Here we are discussing some of the reasons why you should maintain a good credit score.
- Approval of a loan:
Maintaining a good credit score is important to meet the eligibility set by lending institutions. If your credit score is below the required score, it will lead to rejection of the loan. The higher the CIBIL score, the more trustworthy you are in the eyes of the lender; higher are the chances of loan approval, if you meet the rest of the eligibility criteria.
- Get a higher amount of loan for your business:
A higher credit score, as mentioned above, also means that the lender may approve a higher loan amount. For example, if you are looking to buy machinery for a few lakh rupees, and you have a high score, then the chances of getting the loan quickly are higher. It will save you a lot of time and effort to arrange for loans. It will also save you from disappointment from losing an opportunity because you did not have enough funds.
- Increase your chances of an affordable interest rate
One of the most important factors while choosing a business loan is the interest rate. Even a small percentage difference can save you thousands during the tenure. While many factors impact the interest rate, the credit score plays a vital role. A higher credit score will most likely result in a lower interest rate and vice versa. Always use the business loan EMI calculator to know the monthly installment you will pay for the loan amount you take.
You may not need a loan right now, but maintaining it will help you to get an instant business loan when you do require the money. We are also sharing with you some tips on how to maintain the credit score.
- Repay all credit card bills and other EMIs on time. Missing even one payment reduces the credit score
- Keep your debt to income ratio low.
- Make sure your credit information report is updated.
Use the business loan EMI calculator to know your EMIs so that you are aware of your debts and can meet them. This way, you can keep your credit score high and improve your chances of getting a loan approved quickly and with minimum hassles.