A credit score is a three-digit number that indicates how creditworthy you are. When you apply for a loan or a credit card, it’s the first thing most lenders look at. It provides them with an indication of whether you will be able to repay the loan on time. Therefore, maintaining a decent credit score is critical. Making all of your loan payments on schedule, monitoring your credit reports frequently, paying off credit card debt, and keeping your credit utilisation below 30% can help you maintain a good credit score.
Maintaining a good credit score is the most important step to availing of a loan for MSME.
What are the types of credit scores?
- Personal Credit Score
- Business Credit Score
What is a Company Credit Report?
A CCR or a Company Credit report is a detailed document that encompasses information received from different credit institutions on the financial health of the business. This report is used by lenders to estimate the creditworthiness of an organization before granting a loan.
How is a credit score calculated before giving a loan for MSME?
TransUnion CIBIL, Equifax, Experian and CRIF Highmark are credit information companies (CIC) that utilise various scoring models to generate credit reports and determine credit scores based on them. This is why, despite having the same credit history, an individual can have different scores from various CICs. This is due to the fact that credit bureaus each have their own proprietary method for calculating a person’s credit score, and the exact breakdown of the many components that influence the credit score is unknown.
A personal credit score is calculated keeping into consideration the factors like:
- Payment history
- Outstanding debt
- Length of credit history
- Credit mix
- Credit utilization ratio
A business credit score or Company Credit Report is calculated keeping into consideration the following factors:
- Length of Credit History
- Credit Utilization Ratio
- Repayment History
- Outstanding Debts
- Size and Life of the Company
What are the different agencies that provide credit scores?
- CRIF High Mark
Benefits of credit scores
If you have a good credit score, you will have several benefits over others who do not have one or have a poor score. If you have an excellent credit score, you are eligible for the following benefits:
- Lower interest rates on loans for MSME and more favourable credit terms.
One of the advantages of having a good credit score is that banks may give you lower-interest loans and credit cards. Other advantages include a reduction in the processing charge and the possibility of obtaining a larger loan amount.
- Increase your chances of getting a credit card or a loan for MSME.
Borrowers with a good credit score are deemed low-risk, which means their chances of getting loans and credit cards are better.
- Access to the best credit cards with the finest rewards.
You can also receive access to the most rewarding credit cards on the market if you have a solid credit score, including those with the lowest interest rates and the finest incentives, such as cashback, travel points, and other perks.
- Get your credit card approved for a larger credit limit.
You can also get accepted for a greater credit limit on your credit card if you have an excellent credit score. Because of your demonstrated creditworthiness, NBFCs are more inclined to give you loan for MSME.
How to maintain a good credit score?
- Keep your phone number unchanged
- Keep your postal/registered address unchanged
- Make sure all information on the loan application form is correct
- Take smaller loans that are easily repaid
- Always make on-time EMI payments
- Make good use of credit
- Check your credit report and resolve inconsistencies
- Don’t make a lot of loan enquiries from different lenders
- Don’t borrow money from a variety of lenders within a short period of time
- When borrowing from multiple lenders or several loans from the same lender, don’t swap the names of the applicant and co-applicant.
- Don’t default on your existing loan payments
If you are looking to get a loan for MSME, you should only approach reputed NBFCs like Kinara Capital. They work towards evening the playing field and driving financial inclusion by ensuring that every small business owner has quick and easy access to capital. They do not need property collateral and if all your documents are in place, you can get a loan within a day.