Take special care of these things while applying for loan, the bank cannot reject the application even if it wants to.
Business News Desk – It is very disappointing when a loan application is rejected. However, rejection of the application does not mean that all the loan doors are closed for us. First of all it is important to understand the reason for rejection of the application. If any bank or NBFC rejects the loan application then it has to give the reason for this. Generally banks reject loan applications due to low credit score, low income of the customer, high loan burden and inadequate credit history.
Bad credit score is the first reason for application rejection
If your application has been rejected due to bad credit score, then the first thing you need to pay attention to is this. You can get your credit report from credit score agencies like CIBIL and Equifax. After receiving the report, it is important to check whether the information given in it is correct or not. If there is any wrong information in it then it will have to be corrected. If you have forgotten to pay any loan installment, you can improve your credit score by repaying it. There can be many reasons for a bad credit score.
High credit utilization ratio is not good
Many people use credit cards excessively. A credit utilization ratio of 30 percent is considered good. Many loan applications also have a negative impact on the credit score. Every loan inquiry affects your credit score. Therefore, do not make unnecessary loan enquiries. If you need a loan, then apply to a bank or NBFC only after thinking carefully. This will increase the chances of your application being approved. Also, your credit score will not be adversely affected.
Banks consider a credit score above 750 as good.
Do you check your credit score from time to time? If not, make it a habit. A credit score of more than 750 is considered good. Banks and NBFCs easily approve loan applications from customers with a credit score above 750. Banks and NBFCs also look at the debt-to-income (DTI) ratio of the customer. DTI reflects the financial stability of the individual. High DTI ratio is not considered good. A high DTI ratio means that a larger portion of your income is spent on repaying the loan. Banks and NBFCs consider a DTI ratio of less than 40 percent as good.
Banks approve the application as soon as the credit profile improves
If your credit score improves, you can apply for the loan again. It is important to understand that the job of a bank or NBFC is to give loans. They earn income from the interest received on the loan. Therefore, the first attempt of banks and NBFCs is to approve the loan application. They have to take the decision to reject the application only for some major reason. Once the reason for rejection is removed they approve the application.
