WHAT IS FAIR CREDIT IN PERSONAL LOAN?

WHAT IS A FAIR CREDIT IN A PERSONAL LOAN?

A personal loan can help a person with a whole variety of financial problems and various financial challenges. If a person is in need of some cash in order to cover a large expense or have to pay a medical bill or has to consolidate the balance of his credit card, he can always look upto a personal loan. This is because a personal loan can help a person in all of the circumstances mentioned above and not only this but a lot more. 

A personal loan is an installment loan, which means that a person has to repay the amount of loan back to the bank or to the money lender in the form of equated monthly installments and at the same time, it is an unsecured loan which means that you do not have to pledge any of your assets. Hdfc personal loan customer Care helps the customers to clear all the doubts regarding a personal loan.

Also, a person does not have to get the perfect credit to get a personal loan but if the credit of the person falls into the 'fair' category, he may find fewer loan options and will also have a more difficult time in getting a personal loan with the favourable interest rates than a borrower which has a higher credit score. If a person is considering a personal loan and his credit is in the 'fair' zone, then he can even improve his credit score in a lot of ways.

A FICO score of around 580 to 669 is considered 'fair'. FICO ranges from a minimum of 300 to a maximum of 800 and it mainly falls into the following five categories: -

• Very poor - 300-579
  
  
• Fair - 580-669
  
  
• Good - 670-739
  
  
• Very good - 740- 799
  
  
• Exceptional - 800-850.

Your FICO scores are based on the information that is in the credit reports and it is maintained by the three major credit reporting agencies which are - Experian, TransUnion and Equifax. Your FICO score depends on the following five factors: -

• PAYMENT HISTORY- How consistent a person is in paying the bills and the other dues is the most important factor in maintaining a good credit score. This factor mainly counts for around 35% of the FICO score. It means even if you have missed a single payment of the credit card dues or the EMIs, it will have a huge impact.
  
  
• AMOUNTS OWNED- The balances of the credit card divided by the sum of all the available limits of the credit cards gives the credit utilization. This is one of the most important factors to consider and also, along with this factor, how much the progress is made by paying all the loans, accounts for around 30% of the credit score. In simple words, the lower your credit utilization, the nearer you will be to pay off your cards and it will be better.
  
  
• LENGTH OF CREDIT HISTORY- Around 15% of the credit score is based on how long a person has held his loan accounts and his credit cards. This is also one of the most important factors and it also considers the average age of all the accounts of the applicant.
  
  
• CREDIT MIX- The seasoned credit users manage to have a variety of the credit products such as the credit cards, loans, lines of the credit card, etc.
  
  
• NEW CREDIT-  The remaining 10% of the credit score is based on the number of credit accounts that a person has opened recently and how many hard inquiries have been there to the credit report. A flurry of the new applications of the credit can also increase the risk of a person to the money lenders.
  
  

CONCLUSION: -

When a person applies for a credit, the banks or the money lenders use his credit score to assess the risk that is involved in lending you the money.  A higher credit score indicates that a particular person is managing all his credits easily and is also repaying all the debts successfully.

Read More:- Loan Against Property vs. Personal Loan