Rajiv had to deal with an unplanned cost and applied for a personal loan. Since his credit score ratings were good, the process was quick and the terms were comfortable. A co-worker with a weaker score had a different experience, facing delays and extra checks before approval.

Every time you apply for a loan or credit card, four institutions are running a background check. And their opinion matters affect your loan approvals, interest rates, and even credit card limits.

Looking forward to a hike this year to finally land those low-interest loans? You’re on the right path - a salary bump definitely helps.
But here’s the twist: lenders aren’t just convinced by your pay slip. The real dealbreaker is what the credit bureau says. When applying for personal loans, lenders rely on the score that these agencies give you as a measure of your financial behaviour.
 

Anita worked in marketing and believed that her regular income alone would secure her a loan. But when she applied, the lender first looked at her credit report, not her income. That report, based on years of repayments, showed how she managed money.
In this blog, you will learn why lenders check credit bureaus, how your credit score affects approval, and simple ways to keep your record strong.
 

A credit report reflects how you handle money, including bills, EMIs, overdue payments, and even errors you may not know exist. Every transaction you make, from paying your EMI through UPI to managing your credit card bills, leaves a mark here.

With a shift towards digitalisation, Artificial Intelligence (AI) plays a transformative role in reshaping how loan approvals are conducted. Conventional credit scoring models that count heavily on a borrower’s past credit history, salary slips, and employment status are rapidly being improved and, in some cases, replaced by AI-powered credit scoring systems.

When you apply for a loan or a credit card, the lender needs to assess your profile. They want to ensure that you can repay the amount within the specified time. The credit score is a numeric representation of your previous credit behaviour. It reflects how well you have managed your loans or credit card repayments. Equifax is one prestigious organisation that evaluates your creditworthiness. After analysis, they give you a 3-digit number called the credit score. It can be anything between 300 and 900. The higher your score is, the more creditworthy you as a borrower will be.

Credit scores determine your eligibility for loans and other credit products. India has four primary credit bureaus: CIBIL, Experian, Equifax, and CRIF High Mark. When we talk about the Experian credit score, this is your score calculated by Experian, the credit reporting company. While credit scores from all reporting companies are equally valid, financial institutions prefer scores from certain bureaus to assess applicants’ creditworthiness.

In India, your credit or CIBIL report plays a major role in getting any loans or credit cards from financial institutions. Now, if you look closely at a credit report, you must have observed a term called Special Mention Account (SMA). This term is used by a majority of lenders to track accounts that have a slight sign of financial stress or default before they become Non-Performing Assets (NPAs).