A financial institution is an institution which serves as an establishment which pools in the money of the public by accepting deposits from them and grants loan to the public and other companies in the market whether short term or long term based on the type of loan being availed. Loan by phone is a new trend of requesting for a loan and getting the same granted.
Services rendered by the banks for the beneficiary of its customers.
A loan is an amount of money which is borrowed or taken from a friend, relative or a financial institution like a bank expected to be paid back later along with a certain charge on the principal amount which is known as interest. When a customer requests the bank through phone loans, the bank immediately checks the details and income status of the customer on the basis of which whether the customer is eligible to be granted that loan or not depends.
SMS loan have nowadays become a new trend where the customer can request for an amount of loan from the bank just by sending an SMS to the bank. Now coming back to the point, the creditworthiness of the customer is checked by the bank using various information and upon various observations and assessments; the bank calculates the amount which can be granted to the customer at the fullest and these marks in the way for a credit score.
What is a credit score?
A credit score is a mathematical expression and formula used to calculate the creditworthiness of a customer asking for a loan and based on which, the customers are either accepted and granted or rejected for the loan asked for. Who calculates all these? The banks or the money lenders in general who are willing to provide a customer with an amount as loan calculates the income style and all other relevant information of the customer using the scorecard based on which the customer who places a loan request via SMS loan, can get the loan sanctioned, the credit score assures and calculates the various determinants of loan as in the rate of interest of the loan that must be charged, the term period of the loan to be provided, and all other credit limits that the customer is to bind by.
How to calculate the creditworthiness using the credit score?
The credit score of a person also can determine the acceptability of a customer’s credit card usage. As a credit card facility is almost akin to a loan provided the only difference is that, in case of a credit card, the amount is generally less while in case of loans, the amount can either be less or more. The credit score of a customer can be calculated as,
- The payment history of customer who has availed for a loan by phone, the records of the customer’s payment history makes up to 35% of the total scorecard, the faster you repay the bank and get your liability drawn out, the better shall be your credit score.
- Second, comes the total amount actually lent out to you by the financial institution or the money lender. This makes up to 30% of the scorecard. This is often associated with the different accounts held by you and also the income of the individual, if there is high revenue and also a high loan from the same individual, the score drops abruptly and vice-versa.
- Third, comes as for how long the credit is to stay in an individual’s liability count, the longer is the period, the higher will be the score and vice-versa, this makes up to 15% of the total credit score.
- The various types of accounts associated with that particular financial institution or any other become a factor to improve the score rating which is 10% of the total credit score.
- Lastly, any kind of credit activity either by requesting phone loans or using the credit card also renders an upward rise in the rest 10% of the credit score.
Thus in this way, the banks or any kind of financial institutions or money lenders calculate the credit score of an individual or of a company and rate them accordingly which serves as a basis for future loan grants. The better the credit score, the faster the loans shall be granted. So, increase the ratings on your credit score and get loans granted faster.