How does credit history impact loan eligibility?

A positive credit history increases the likelihood of loan approval because lenders view it as an indicator of a borrower's reliability and financial responsibility. When an individual has a strong credit history, which includes on-time payments, low credit utilization, and a mix of credit types, lenders are more inclined to trust that the borrower will continue to meet their financial obligations in the future.

This trust enables lenders to provide loans with better terms or even approve applications that might otherwise be at risk if the borrower's credit history were less favorable. Therefore, having a positive credit history not only aids in securing loans but can also lead to lower interest rates and more favorable repayment terms.

For those with a poor credit history, it is more challenging to obtain loan approval since lenders tend to perceive them as higher risk. A neutral credit history does not assure approval, as lenders often require a demonstration of creditworthiness to mitigate the risks associated with lending money.