Credit bureaus, also known as Credit Information Companies (CICs), are licensed with the Reserve Bank of India (RBI). These specialized agencies collate and maintain credit-related information for individuals and businesses across the country. The data is used to generate credit scores and reports that lenders review to make finance-related decisions.
There are four credit bureaus in India—TransUnion CIBIL, Experian, CRIF High Mark, and Equifax. Every agency uses its unique algorithm to calculate the credit score; however, most financial institutions validate the reports generated by each of these four bureaus.
When you apply for a loan, the lender determines your creditworthiness. They evaluate and approve your application if your credit report reflects that you are a responsible borrower. The following factors are considered to ascertain your credibility.
- Payment history for loans taken in the past, which include the already repaid and currently outstanding ones.
- Number of inquiries made for different types of loans, such as personal finance, credit card-related debts, car loans, and much more.
- Amount of secured and unsecured loans, as well as the ongoing monetary obligations.
- Credit utilization, which shows if you have taken more debt over time or if you are using a high percentage of the available credit limits.
If you are a business owner and want to apply for a SME loan, you need to know that lenders take various aspects into account to ascertain your SME loan eligibility. Some of these are as follows:
Detailed analysis of your business
Financial companies thoroughly evaluate the nature of your business and future expectations from it. They consider your expertise, experience, and the number of years you have been in the business. They also check the type and quality of collateral that you are willing to provide.
Credit score
Most lenders require a credit score of at least 750 when you apply for a loan. It is recommended that you periodically keep track of your credit report to see if there are any significant fluctuations. It shows your creditworthiness and a summary of your credit history.
Loan history
Financial institutions check your business’ loan history to figure out determine the creditworthiness. They investigate any loan taken during the previous 36 months and its repayment history. Many banks and non-banking financial companies (NBFCs) like Mahindra Finance offer business loans. They review your credit score once you submit the necessary SME loan documents to establish your eligibility. Before you apply for one, go through your credit report to see if there are any irregularities and rectify these to prevent rejection.
To avail of funds easily, visit the Mahindra Finance website, check out their SME loan interest rates, tenures, and other terms and conditions and apply instantly.
