Hyderabad:It is well known that banks and financial institutions give more importance to credit scores over other things. An individual with a 750 score stands a good chance to fulfil his dreams. With proper planning, it can be achieved, not as difficult as it is made out to be. Timely payment of credit card bills is one of the key factors, albeit it is practically difficult sometimes. Due to various reasons, there could be delays in remitting EMIs, credit card bills and the pandemic could be one of the reasons.
If the credit score of an individual is below the 700 mark, there are more possibilities for banks and institutions to decline his/her loan application. Even if they sanction a loan, banks could be charging more interest rates, which cannot be avoided. Factoring in all these issues, it becomes a challenge to avail of a loan with a lower credit score.
Settlement is loss-inherent...
Non-payment of a loan could dent the credit score rating of an individual. If the payee doesn't remit EMI for three months continuously, banks could mark the loan as NPA (Non-Performing Asset). If the remittances are discontinued altogether, banks would term it as default and begin to make plans to recover the total loan amount. This is called the 'Settlement' option.
If the agreed amount is repaid, banks would write off the loan. The banks will inform the same to Credit Boards as well. Subsequently, banks will think twice before granting a loan after seeing 'settlement' towards the loan on the credit report of an individual. Hence, it will affect an individual in the long run. If somebody has already chosen a settlement option, it is better to clear the complete loan amount. Then the clause will be altered from 'settlement' to 'close' and could lead to a hike in credit score.