How does my credit history impact me?

How does my credit history impact me?

Those borrowers, who have a good history of paying back their dues on time and in full, can benefit in two ways.
First, they will find that their loans are processed faster and can be disbursed faster because the lender might have lesser doubts or concerns on such borrowers.

Second, those with a good credit history will be seen as lower risk. They will find that they can get loans on better terms, especially slightly cheaper interest rates. Those who have historically had a bad record of managing their loans and repayments will find that their past behaviour can adversely affect their ability to get loans in the future.
Let us take the case of a young 25-year-old man who takes a personal loan for Rs 10,000. This person has a rather casual attitude towards paying the loan back. In fact, he moved to a different city with a new job and then decided not to pay his dues because he felt it would be hard for the lender to track him down in his new job and city. However, a credit bureau can centrally track this person’s credit behaviour and can share this negative information with lenders across India who might be considering this person for a loan in the future.

For instance, as this person grows older and needs to apply for a more important loan like say a Rs 4 lakh car loan, or a Rs 15 lakh home loan, he might find that lenders are not willing to consider his application, or will only consider it on terms that are very harsh. All this because he lacked the discipline to pay back the relatively small amount of Rs 10,000.

It is worth noting that an individual’s credit history can be interpreted differently by different lenders, depending on their own criteria and their internal risk management policies. So while one lender can reject an application looking at your credit history because they don’t want to take the risk of lending to you, it is quite possible that another lender might be comfortable lending to you. It is all a matter of interpretation of your factual data that comprises your credit history.