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5 Things Your Lender Would Look for in Your Credit Report Before Approving Your Personal Loan

Clix June 28, 2021


Are you looking for funds for home renovation, travel, education, or debt consolidation? If yes, then you may apply for a personal loan to cover the related expenses. These days, NBFCs like Clix Capital have made personal loans extremely accessible with easy application, fast approval, simple eligibility criteria, and minimal documentation requirements. However, since personal loans are unsecured loans, lenders largely rely on your credit score to determine your creditworthiness and decide your loan approval or rejection.

Lenders require you to have a credit score of 725 or above to approve your loan application. You get this score based on your credit history and repayment habits. Lenders go through your credit report to check how regular you are with your EMI and credit card bill payments, what other debts you are under, what your credit utilization ratio is among other factors.

These are the 5 things that would work in your favour when you apply for a Personal Loan.

1.    A Long Credit History with Responsible Borrowing

Personal loans are unsecured loans for which you do not pledge any security, collateral, or guarantor. So, the lenders want to ensure that you are a responsible borrower by looking at your credit history. Your credit report has records of all the loans and credit cards you have taken so far and details about whether you repaid them on time or not.

The lenders prefer a borrower who has a long credit history of regular payments over a person who has never taken a loan.

2.    Diverse Credit Mix

Lenders want to see the diversity of credit in your credit report. If you have been handling different types of credit successfully, including credit cards, secured loans, and unsecured loans, along with their regular payments, you will make a positive impression on your lender almost instantly. To pose yourself as a responsible borrower, keep your credit report free from any mistakes, late payments, repossessions, collections, foreclosures and judgements.

3.    Low Credit Limit Utilisation

Lenders prefer borrowers who do not depend on credit for their expenses. If you have a credit limit of ₹1 lakh, you must not use all of it. Keep your credit utilisation as low as possible, not exceeding 40%-50% of the available credit. If you have already maxed out on your credit cards, there are fewer chances that you will get a loan with favourable terms and conditions. While checking your credit report, lenders want to see a large part of the available credit limit still left. The higher your credit balance is, the higher chances you have of getting easy loan approval.

4.    Fewer Listed Inquiries in the Inquiries Section

When you get in touch with a lender to get a loan, lenders look at your credit history to decide whether to give you a loan or not and at what terms. When a lender checks your credit report, they make a hard inquiry on your credit.

Your credit report has a special section in which your hard inquiries are enlisted. They may stay on your credit report for as long as two years. If there are too many hard inquiries in your credit report, lenders perceive you as a credit-hungry borrower.

5.    Low Debt-to-Income Ratio

Lenders would also want to see a low debt-to-income ratio in your credit report. If you are already heavily indebted and paying too many EMIs every month, they may suspect your capacity to handle repayment of more loans. Take loans after evaluating your income and financial obligations only.

So, if you are looking forward to applying for a personal loan, check your credit report yourself first and evaluate how it presents you in terms of being a borrower.

Clix Capital offers personal loans of up to ₹25 lakhs and you may get your approval in as little as 15 minutes*. However, ensure that your credit report has these 5 things that improve your personal loan eligibility.

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