Taking loans have become an essential part of life in today’s economic sphere. When you decide to take a loan, you think of signing a contract with the given terms and conditions. A credit score can be defined as belief or trust in your repaying capacity. Repaying capacity as in whether or not lenders believe you will be able to repay the debts. It thus means how well and how much time do you pay your loans and other financial obligations.
All loan providers and lenders prefer a favourable credit score because a good credit score shows your creditworthiness.
The credit score and loan are related in a very delicate manner. Both loan and credit score equally impact each other.
• If you have a low credit score, then no lender will sanction your loan.
• A good credit score assures the lenders that you will repay the loan, which in result helps in getting the loan.
Just like this, loans also affect the credit score equally.
• Timely loan payments increase the credit score.
• High loan balances hurt the credit score.
In the future, this credit score can help you function a lot in financial terms. A lender can decide based on this credit score that you are eligible for a loan or not.
Read more: How Your Credit score impacts your loan?
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