First-time Borrowers, Do Not Worry

We all have dreams that we want to fulfil, don’t we? But some dreams do come at a cost. At such times, your daily income or savings may not be enough to help achieve your financial dreams. So you make an effort to take help from other sources, such as taking a loan.

Some of us have already borrowed from lending institutions while others have never done it. Which category do you fall in? Are you the one who has never borrowed? If that is so, it is, indeed, great that you have been managing your funds and balancing your needs so well.

But in future, you may want to buy a new car or own a home for which you may require a loan. Are you hesitating to avail the credit facility as you don’t have a credit history and hence, no credit score? You need not worry about it now.

As per the recommendations of a committee set up by the Reserve Bank of India, first-time borrowers should not be denied credit due to lack of credit history. Hence, lending institutions would assess your credit worthiness in the following ways:
· Monitor your demographic information details.
· Study the sample performances of similar groups of people and analyse their behaviour.
· Study your bank history. It will play an important role in deciding your behaviour in managing your money, e.g., savings accounts.
· Examine your employment history in terms of stability at work, consistency in performance and dependability.

The lending institutions need to consider these factors in addition to their internal credit policies. For instance, a conservative lending institution could be averse to approving a credit facility for a person with no credit history while an aggressive lending institution may approve that credit facility. So go ahead and take that chance – try and avail a credit facility in order to fulfil your financial dreams.

Dream big and fulfil them sensibly. And remember, there is always a first time – even for taking a loan.

About the author: Satish Mehta is the founder and director of Credexpert, a credit and debt counselling company in India.