How important is my credit score for loan approval?

Your credit score plays a key role when loan providers assess your business loan application. It offers them a snapshot of how well you have managed credit and debts in the past.

A higher credit score indicates that you have generally repaid your previous loans and credit card bills in a timely and consistent manner. This responsible repayment history allows banks or Non-banking Financial Companies (NBFCs) to perceive you as a financially disciplined applicant with lower risk. Consequently, applicants with good credit scores usually have better chances of loan approval.

On the other hand, a poor credit score resulting from defaults or irregular repayments in the past makes lenders apprehensive. It creates an impression that you may not be capable of managing additional debt. This leads to decreased eligibility for the required loan amount or higher interest rates. In some cases, the application may also face rejection.

It's a good idea to check your credit score early and improve it if necessary before applying for a business loan. Keeping your credit score above 700 by managing your finances wisely can help you get approved faster and secure better loan terms.