The loan application that you submit, undergoes a screening process before the lender gets back to you with the result of the screening. The screening process is basically the credit underwriting process, through which the lender tries to assess the credit risk involved. The lender is lending out money to you and through the credit risk assessment process he has to understand whether the money could be repaid by the borrower along with the interest you are supposed to pay. As a borrower your creditworthiness must be assessed or, else, the lender would be at a greater risk. Hence, the credit underwriting process takes place. Now a number of factors come into play here including the credit score.
How the credit underwriting process takes place?
Basically the credit risk determines your financial strength and capabilities, which is why you have to submit a number of documents as a proof of your financial stability and you having the capability if retuning the amount you are borrowing along with the interest rate. the credit score will play a significant role, this is a number between 300-900 and the higher your number is the better are your chances of securing that loan. A higher number on the scale something which is 800-850 is definitely an amazing score, anything below 500 is bad. But you can take care of your credit score if you start taking the positive steps to enhance your score. If it is really low then you have to gradually improve it, so that during the underwriting process, it can get the thumbs up.
Usually traditional credit history data is all that the lenders resort to during the underwriting process, but when it comes to first time borrowers or, people with no documentation, it is hard to carry out the assessment process. However, now the accessibility of the alternative data takes care of this issue. The data left behind by the users on the digital platform could well be the indicators of financial strengths and capabilities.
Be aware of your credit history and credit score and take the right steps to keep these in good shape to get the approval.
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