Loan is the lending of money from one individual, organization or entity to another individual, organization at an interest rate and a promissory note which includes the principal amount along with the interest charged by the lender over a certain time period. In this blog, the concept of credit score will be introduced and how it affects the chances of you getting a loan.
WHAT IS CREDIT SCORE AND WHY DO I NEED TO HAVE A GOOD CREDIT SCORE?
Credit Score are a numerical expression based on the level analysis of the person’s credit file to represent the creditworthiness(Credit Risk) of an individual. It is primarily based on a credit report information typically sourced from credit bureau. Lenders such as banks and credits card companies uses credit scores to evaluate the risk posed by lending money to the consumers. A credit score is basically a 3 digit number ranging from 300-850. Credit scores are numerical summary of information in your credit report. The scores are used to gauge your creditworthiness. A good credit score is very necessary since it’s one of the major determining factors when it come’s to borrowing money. The better the score, the more are the charges of the application getting approved and get the best interest rate.
WHAT’S YOUR SCORE?
Just because you are particular about bills and you pay them on time doesn’t mean your score will be good. You can check your score at www.financepeer.com or connect at firstname.lastname@example.org. Financepeer integrates CIBIL credit rating along with non credit bureau data such as social media data, demographic data, online transaction data, consumer transaction data and the history of transactions along with artificial intelligence techniques to calculate a new credit score which would suggest at what interest rate borrower should get money, making the experience of peer to peer lending good for both lenders as well as borrowers.
WHAT IF YOU DON’T HAVE A CREDIT SCORE?
If you don’t have a credit score as of now, then you need not worry because at Financepeer, your background check will be done and according to the reports generated, you will be assigned a credit score. There are majorly 2 factors which are taken into consideration while generating your credit score. If the reports of both the factors are upto the mark, then the credit score is assigned. The factors are:
- Social Category
- Account Statements Category
- SOCIAL CATEGORY:
Here, all the social media accounts are been verified and checked in terms of data points. There are about 13,000+ data points assigned to an individual depending upon various factors. One of them being education – The individual is judged based on the qualification he holds – 10th, undergrad, grad, postgrad etc. Another factor is his connects – If he is connected to right set of people and what’s their qualification. This factor is essential because for eg – if the individual is not able to repay the loan, does his connects have the potential to repay the loan or not. If the connects are absurd and don’t seem to help him out in time of crisis, the individual’s social score will decrease automatically.
2. ACCOUNT STATEMENTS CATEGORY :
In this section, the account statements are taken into consideration. There are many factors in this category. Here are a few of them: If an individual earns Rs.,1,00,000 per month for e.g and wants a loan of Rs. 70,000, but by the end of the month, he tends to use the entire amount, then there are very rare chances of him to repay back the loan. In such cases, the credit score remains low. Another factor in this category is the frequency of transaction done from his account based on the amount present in his account. If the transaction done are frequent and the amount is huge everytime, then it will be difficult for the individual to repay the amount unless he has another alternative account.