Imagine yourself wanting to buy a house, or purchase a car for long. You managed to save and collect the downpayment it would require to get the loan. Now, you are going to the bank and applying for the loan. To the first bank, the loan gets rejected. You are in a shock. But you feel that's okay. It can happen. So with high hopes, you visit another bank. The story remains the same. Now, you are a little disappointed. You got to two other banks, and it is still the same. You feel devastated! Why did that happen? Why are your loan applications are getting rejected from everywhere?
You prefer getting a personal assistance to this issue. So you search online for the credit consultancy who can help you get an idea about why are your loan applications getting rejected. Of the options you get, you choose to call them to get an assistance for some consultants like Credit Sudhaar who would help you in taking a close look over your CIBIL score, helps you in increasing it and also helps you in getting the loan. The first step to do when the loan applications are getting rejected is to check the credit score. It is one of the major reason why the loan can get rejected if everything else is in place. Once that is checked, it is then the major step to work on the score. The credit consultancies help you in that. Suppose, you have made series of missed and delayed payments in past, or if you may have defaulted on any loan, your name would appear in loan defaulter list. If this is the possibility, it becomes very difficult to get the loan from banks or NBFCs (Non-Banking Financial Company).
This also impacts your credit card history. Banks may reduce your existing credit card limit. If you have applied for a new credit card, the application may get rejected. Now, this was about loans and credit cards. But, if you are an individual who is working in a high position or in some financial institution and plan to switch a job for a better prospect or better good opportunity. The new employers also check your score. As, on higher positions, you would be handling the sensitive and important data, which is to keep under a shield, they have to know if you are responsible enough for the post. A low score describes the negligent part of the personality and hence may tend to not get that opportunity because of this reason.
And if by chance, the loan or the credit you have asked for hets approved even with the low cibil score, the rate of interest you have to pay would be much higher. Let's understand this with an example. If suppose, Person "A" wants a home loan worth 20,00,000 Rs. In the usual case, the home loan interest rate may revolve around 8% to 15%. So, let us consider that rate would be 11%. So that would be 2,20,000. But if the score is low, it may cost upto 15% or even 18% at a time. So if we consider 16.5%, that would cost upto 3,30,000. So, you would end up paying 1,10,000 extra per year. And if suppose the tenure for the loan is 10 years, this amount will go to 11,00,000. Now, see, how much difference would this makeover that huge span of years. And how will that affect your financial life?
Work on the credit score, try improving it over few months and then apply for the loan. As, if the financial health would go down, you can't plan for savings, or other asset class to be purchased.