When you apply for a business loan with a formal lender, most lenders will check your bureau score (also known as credit score) before lending to you. Your credit score can range from 300 to 900, and sometimes borrowers can even have a minus one or NH credit score.
What does this score mean, and are you eligible for a business loan with an NH bureau score? Let’s find out.
What is a credit score and why is it important when I apply for a business loan?
Your credit score, commonly known as bureau score or CIBIL score in India, is a 3-digit figure assigned to a consumer or a company by one of the 4 Credit Information Companies (CICs) authorized by the Reserve Bank of India (RBI). These CICs, or credit bureaus, use your credit and financial history to determine the creditworthiness and future likelihood of repaying your loans on time.
Your credit score is dynamic, so it fluctuates over time depending on your business financials and your ability to keep up with your debt. If your credit score is low, you can improve it over time by practising finically responsible behaviour, starting with paying your EMIs on time!
When you apply for a business loan with a formal lender, they review your bureau report as well as your credit score before deciding to lend to you. So, both your bureau report and bureau score can make or break your chances of getting a business loan.
Credit scores are categorized in the following manner:
- 300 – 550 – Poor
- 550 – 650 – Fair
- 650 – 750 – Average
- 750 – 900 – Good
The higher your credit score, the more likely you are to get the business loan you need to grow.
What is an NH credit score?
An NH (No History) credit score is similar to a minus one (-1) credit score. Through this classification, the credit bureau indicates to a lender that they have no credit history or credit enquiries made about the borrower.
If you are a first-time borrower, meaning you’ve never tried to get a loan before, and you don’t even have a credit card account with a lender in India, your credit score may be “NH”.
Can I get a business loan if I have an NH credit score?
An NH bureau score is not necessarily a bad thing. It just means you are an untested borrower. Therefore, the credit bureaus have no data to use to determine your ability to take on risk and repay loans.
So, while it may be trickier to get a loan with this credit score, it’s not impossible. Despite having an NH credit score, some CreditEnable lender partners will consider lending to you if you fulfil all their other eligibility criteria for a business loan. These criteria include:
- You have strong business financials.
- You have a solid business plan that considers both opportunities and challenges.
- You own assets that you can either use as loan collateral or proof of ownership.
- Your business vintage is at least 2 years or more.
- You have legal documentation to prove your business vintage.
Since you don’t have a credit history, lenders may not be able to assess your creditworthiness in the first go. So, they may offer you a loan of a relatively small loan amount, with a higher interest rate and a short repayment period. Once you get the business loan and start paying your loan EMIs, the lender can better assess your creditworthiness, and you will become eligible for a bigger loan value at better loan terms in the future.
Is my credit score important when I apply for a loan using CreditEnable?
When you apply for a loan using CreditEnable’s technology platform, we do a soft pull of your Experian credit score to assess your eligibility for the business loan. Therefore, your credit score carries weight when you apply for a business loan with us.
This soft enquiry that we do has no negative impact on your score as it is not a pull made by a bank or an NBFC. If your bureau score is too low and you’re not eligible to get a business loan from one of our lender partners right now, we’ll tell you the exact reason why and how to improve your credit score. By taking these actions, you’ll be able to improve your credit score and successfully get the business loan you need from a formal lender in the future.
Business Loans. Enabled Simply.