Earlier, most lenders checked an applicant’s credit score
only to decide whether to lend to him. But now many are using it to decide the loan rate as well. The effective loan rate for home loans linked to the external benchmark is arrived at by adding three elements: repo rate (or any other benchmark), spread, and credit premium. Banks now use the credit score
to decide a person’s credit premium.
Many companies nowadays check the credit score
of people they plan to hire. They believe that a person who has a poor score may not be disciplined in his financial life. And if he is debt-burdened, he may not focus 100 per cent on his job.