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Good credit history and credit score could mean better lending rates


Good credit score could mean better lending rates
As per The Economic Times report more and more prospective loan borrowers are seeking their credit report from authorized agencies. The sentiment has prevailed as consumers are understanding the fact that a better credit history enables them to negotiate better loan rates with the lending institution. Also, the interest in getting the credit score on part of the prospective customer is said to have a direct co-relation with the penetration of banking in a partial area. Confirming the stance MD of Experian Credit Information of India was quoted in The Economic Times report saying "Consumer interest in going for credit scores is directly co-related to banking penetration in a particular geography."

Institutions rendering credit history report come up with the report and hence the creditworthiness of individuals with no prior borrowing record by analyzing and evaluating credit card transactions. Of late, such institutions suggested an increase in applicants from Tier-II cities who were keen on getting their credit score. Senior Vice-President Consumer Relations of CIBIL was quoted in one of the media reports saying " We have seen a significant increase in consumers reaching out for scores and reports in metros as well as tier-II and tier-III cities."

The product unveiled by Credit Information Bureau of India Ltd. (CIBIL) that assesses the credit history enables loan borrowers to negotiate lending rates with financial institutions. With improved financial awareness and levels of financial literacy in tier-II cities at par with the metros (as adjudged by the consumer eductaion programme of CIBIL) consumers are increasingly comprehending the importance of good credit history and related credit score in realizing better interest rates. And further augmentation of such awareness level is likely to beneficial for both the consumers and financial services industry in the near future as more and more prospective loan borrowers will work towards maintaining good credit history.


How does good credit history allows you to realize competitive lending rates?

As per the RBI, differential pricing mode should be opted by the bank and for it some financial institutions are giving due weightage to the credit score parameter for taking loan disbursal decisions. So, until late while for a good credit score you were provided with some of the benefits such as waiver on processing charges, banks now allow you to negotiate on interest rates depending on your credit record.

So, good credit history and credit score fetches competitive interest rate for the loan borrower based on the negotiation capability of the borrower. Further, the extent of rebate could be 25 basis points that can enable an individual to save considerably over the years.

Story first published: Monday, November 18, 2013, 13:13 [IST]
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