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What Is The Importance Of Your Business Credit Score

Rapid strides made by technology in recent years have entirely revolutionised the financial services industry. Now everything is being done online, starting from applying for a business loan until the amount being disbursed into the account of the borrower. The integration of technology in the finance sector has brought about a lot of transparency about how the financial institutions work and what are the various parameters against which a business loan application is evaluated. One of the most significant technological revolution in the finance industry in recent years has been the introduction of the Credit Score.

Credit Score is the single most significant factor that decides the outcome of all loan applications. A credit score is basically a numerical representation of your creditworthiness out of 900. In India, the credit score is calculated by bureaus such as CIBIL and Experian.

Lenders use a credit score to evaluate applications for a business loan in Delhi and nearby areas and then decide the outcome of applications for business capital loans and various other types of business loans. Having a good credit score (700+) is necessary to get the lowest interest rates against loan applications.

Out of the various financial institutions operating in India, online lending companies have emerged as the preferred option for small business owners. With the numerous features that online lending companies offer through their business capital loans, there are numerous advantages to offer for small business owners.

About Online Lending Companies

Online lending companies are specialised NBFCs who conduct their operations through online platforms such as their mobile app or website. These companies have taken the entire process of processing business loan applications online, which helps them follow a paper-less procedure with minimal documentation requirements. As such, they are able to decide on your application for business loans in a few working days itself.

To be eligible for an unsecured business loan of up to Rs. 7.5 lakhs from an online lending company, your business must have an annual turnover of over Rs. 10 Lakhs in the previous year. The maximum repayment tenor that you can opt for is up to 24 months. As these business loans are unsecured in nature, you need not furnish any collateral to avail this facility and are free to use the money for any business-related requirement of yours.

Moreover, you also have the option to foreclose the loan, if your financials allow you to, and save a lot of money on interest cost, as there are no additional charges levied on pre-payment of unsecured business loans by online lending companies.

These companies conduct an independent credit evaluation process to ascertain your creditworthiness, in addition to CIBIL. This helps them get a holistic view of your financial position and enhances the chances of our business loan application being approved. 

How to maintain a good credit score?

Maintaining a good credit score is a gradual process and requires good financial discipline on your part. There are various methods that you can use to maintain an excellent credit score, such as:

  • Repay your Bills on Time

You must make it a habit of repaying all your bills on time. If possible, you can also put all your bills and EMIs on auto-debit from your bank account. This way, you will never miss the due date and will only have to manage one account.

  • Reduce your credit card utilisation ratio

You must ensure that the credit utilisation ratio, i.e. the total amount you have utilised against your credit card limit must be below 40% of the total sanctioned limit. In order to do that you must repay as much amount as possible every month and avoid depending on making minimum payments only.

  • Repay your credit cards first

Credit cards carry significantly high rates of interest and should, therefore, be repaid at earliest. Having such high-interest debt will really impact your credit score negatively. So before settling your personal loans or business loans, repay your credit card dues at earliest.

  • Pay EMIs on time

You need to ensure that you repay all your big EMIs on time. If you are repaying all your EMIs on time, then even if your debt exposure is high, lenders will consider your application positively.

  • Check your credit report

Sometimes there are some clerical errors in the data based on which the credit score is calculated, or some debt that does not belong to you is reflected in your credit report. To rectify this error, you must keep a close eye on your credit report. If you find any discrepancy, it must be raised in front of the relevant authorities.

Now that you know that maintaining a good credit score is very important in the present times, you can follow the points mentioned above to ensure that your application doesn’t get rejected due to low credit score.

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