Yes, credit score for personal loan is affected by personal loan. Thanks to the wealth of information provided by the Government of India as well as the initiatives taken by several credit bureaus, one now sees an increase in awareness about the importance of credit history as well as credit score.
How is your credit score related to personal loans?
There is a long list of financial behaviors as well as transactions that affect your credit score. Most employed people with a stable income take up personal loans. This is due to the rampant spread of consumerism that is present in today’s world and also due to the easy availability of personal loans by various financial institutions and NBFCs.
When you apply for a Bajaj Finserv personal loan, the lender or the financial institution will first run a background check of your financial history to confirm if you are capable of returning the loan amount in a timely manner. Once your information has been accessed from the credit bureau, the lender will feel more comfortable and assured about accepting your application for a personal loan.
It is mandatory for financial institutions and NBFCs to share the financial information of the borrower with the credit bureaus. CIBIL (Credit Information Bureau of India Limited), the chief primary credit bureau in India has implemented a 3-digit number system describing in full detail, the financial history of the person; this three-digit numerical pattern is known as the CIBIL score.
How is CIBIL score for personal loan affected?
We have already established that personal loans are easily available. But if you do not pay your payments in due time, it will have a negative effect on your credit score. If you keep applying for personal loans at regular intervals, this will affect your credit score adversely. Also, if you have one personal loan running currently and just one more running in parallel, this will too affect your credit score adversely. This will negatively impact your credit score as it reflects badly on your financial management methodology.
As personal loans are given out without any security, lenders and financial institutions are usually very selective. All the applications submitted for a Bajaj Finserv Personal Loan, whether approved or rejected have to be sent to CIBIL for documentation. So, if you have filled out loan applications with several prospective banks and lenders, then your chance of getting your application approved may be rejected as the information has already been sent to CIBIL. This information is reflected in your credit history, therefore, impacting your credit score in a negative way. This will occur if you have filled out personal loan applications with several lenders or just a few but within a short duration of time.
Frequent loan applications portray an image of you that you are desperate for credit, which is generally proved as not satisfactory by the lenders or other financial institutions.
One of the myths related to this subject is that most people believe that if you pay-off your personal loan before the tenure period, it will adversely affect your credit score. This is far from the truth. On the other hand, payment of the loan early shows proof to the lender that you are more than capable of managing debt. Also, you will be able to behave responsibly with debt obligations.
In reality, it is not the personal loans that directly affect your credit score, but the way you go about filling your applications for the said personal loan.
“Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!”