In today’s time, whenever you think of taking a personal loan, home loan or any other type of loan, your credit score is first checked. Bank and NBFC institutions decide keeping your credit score in mind whether you should be given a loan or not, and if yes, at what interest rate and with what conditions. If your credit score is good, you can get a loan at a low interest rate and without any guarantor. But if this score is bad, banks can clearly refuse to give you a loan.
Through this article we will try to know if a person with 500 credit scores can get a loan or not, and if not, what measures he should take.
1. What does 500 credit score mean
The credit score is a three -digit figure, which reflects your credit history. The score is mainly released by four large credit bureau – Cibil, CRIF High Mark, Equifax and Experian. The score above 750 is generally considered good, while 500 or less scores are considered quite weak and risky.
It is very difficult for a person with a 500 credit score to take a loan from any bank. This score is an indication that the person has not paid the EMI or credit card of his loan on time, or he has tried to take a loan repeatedly, which has negatively affected his profile.
2. Why banks do not give loans
Mainstream banks such as HDFC Bank, ICICI Bank, Axis Bank etc. prefer most of the same people whose credit score is at least 650 or more. These banks believe that borrowers with poor credit scores are more likely to default. Therefore, they avoid lending to such borrowers or offer loans with very strict conditions.
In case of credit score, bank or NBFC organization can impose additional conditions such as high interest rates, high processing fees and guarantors. Also, many such applications are also rejected without any reason.
3. What to do so that loans are found even on 500 scores
It is necessary for a person who scores 500 to try to improve his score first instead of applying for a direct loan. According to Live Mint report, Basic Home Loan CEO Atul Monga believes that some measures can gradually improve the credit score.
First of all plan to repay all your outstanding loans on time.
Pay credit card bills and EMI on time.
Keep the credit utilization ratio below 30 percent.
Avoid applying for many credit cards or loans in a short time, as it can also make the score worse.
Check your credit report regularly, if there is any mistake in it, then improve it.
Adopting these measures will not only improve your score, but will also increase the possibility of getting loan at better interest rate in future.
Loan challenges on 500 credit score
If a person applies for a home loan with a 500 credit score, he may face many difficulties:
Loan approval is very difficult
The interest rate is very high on approval, which can go up to above 10 percent
High processing fees and strict conditions can be implemented
In some cases a co-application or guarantor may require
Whereas people with good credit history can get the same loan at a low interest rate like 8.1 percent.
