Lenders consider your CIBIL score before approving loans or credit cards because it is a measure of your creditworthiness and indicates the likelihood of you repaying the loan or credit card debt on time.
Here are some reasons why lenders consider your CIBIL score before approving loans or credit cards:
• Risk assessment: Lenders use your CIBIL score to assess the risk involved in lending to you. A high score indicates that you have a good track record of repaying your debts on time, making you a lower risk borrower. A low score, on the other hand, suggests that you have had issues with repaying debts in the past and may be a higher risk borrower.
• Loan approval: Your CIBIL score plays a crucial role in determining whether your loan application will be approved or rejected. A good CIBIL score can increase your chances of getting approved for a loan, while a low score can result in your application being rejected.
• Interest rates: Lenders use your CIBIL score to determine the interest rates you will be charged on your loan or credit card. A high score can help you get a lower interest rate, while a low score may result in higher interest rates.
• Credit limit: Lenders may also use your CIBIL score to determine the credit limit for your credit card. A high score may result in a higher credit limit, while a low score may limit the amount of credit you can access.
In summary, lenders consider your CIBIL score before approving loans or credit cards to assess the risk involved in lending to you, determine the interest rates you will be charged, and decide the credit limit for your credit card. Maintaining a healthy credit score is crucial to access better credit terms and financial products.
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