Credit ratings and their impact on loan approvals is a topic that has appeared in IELTS Writing Task 2 essays multiple times in recent years. Given its relevance to personal finance and banking, it’s likely to remain a popular theme in future tests. Let’s examine a sample question and analyze model responses for different band scores.
Analyzing the Task
Some people believe that banks should only provide loans to customers with good credit ratings. Others argue that everyone should have access to loans, regardless of their credit history. Discuss both views and give your own opinion.
This question presents a balanced argument task, requiring candidates to discuss two opposing viewpoints and provide their personal stance. The topic revolves around the relationship between credit ratings and loan accessibility, a subject relevant to many countries and economies.
Band 8 Sample Essay
Here’s a model essay that would likely score in the Band 8 range:
The debate over whether banks should restrict loans to those with good credit ratings or make them accessible to all is a contentious issue in modern finance. While both perspectives have merit, I believe a balanced approach that considers individual circumstances is the most prudent course of action.
Proponents of limiting loans to customers with good credit ratings argue that this practice mitigates risk for financial institutions. By lending only to those with a proven track record of responsible financial behavior, banks can reduce the likelihood of defaults and maintain a stable lending environment. This approach also incentivizes financial responsibility among consumers, encouraging them to manage their credit wisely to ensure future access to loans. Moreover, it helps prevent individuals from taking on debt they may struggle to repay, potentially saving them from financial distress.
On the other hand, those who advocate for universal loan access contend that this policy promotes financial inclusion and economic opportunity. Many individuals, particularly those from disadvantaged backgrounds or in developing economies, may not have had the chance to establish a credit history. Denying them loans based solely on this criterion could perpetuate cycles of poverty and hinder economic growth. Furthermore, some argue that credit ratings do not always accurately reflect a person’s current financial situation or ability to repay a loan, as circumstances can change rapidly.
In my opinion, while credit ratings should be a significant factor in loan approval decisions, they should not be the sole determinant. Banks should adopt a holistic approach that considers an applicant’s current income, employment stability, and overall financial picture. This could include alternative data sources such as rent and utility payment history for those without traditional credit records. Additionally, offering financial education and smaller, “starter” loans could help individuals build credit responsibly.
In conclusion, while good credit ratings are important indicators of financial responsibility, a more nuanced approach to loan approvals would better serve both financial institutions and society as a whole. By balancing risk management with opportunities for financial growth and inclusion, banks can play a crucial role in fostering economic development and individual prosperity.
Band 8 Essay Analysis
This essay demonstrates several qualities that contribute to a high band score:
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Task Response: The essay fully addresses all parts of the task, discussing both viewpoints and clearly stating the writer’s opinion.
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Coherence and Cohesion: The essay is well-organized with clear paragraphing and effective use of cohesive devices (“On the other hand”, “Moreover”, “Furthermore”).
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Lexical Resource: The essay uses a wide range of vocabulary accurately and appropriately (“mitigates risk”, “incentivizes”, “perpetuate cycles of poverty”).
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Grammatical Range and Accuracy: The essay demonstrates a wide range of grammatical structures used accurately and flexibly (“While both perspectives have merit”, “By lending only to those with a proven track record”).
Band 7 Sample Essay
Now, let’s examine a sample essay that would likely score in the Band 7 range:
The question of whether banks should provide loans only to customers with good credit ratings or make them available to everyone regardless of credit history is a complex issue. Both viewpoints have their merits, and I will discuss them before presenting my own opinion.
Those who believe loans should be restricted to individuals with good credit ratings argue that this practice reduces financial risk for banks. When banks lend money to people with a history of responsible financial behavior, they are more likely to get their money back on time. This approach also encourages people to manage their finances well to maintain a good credit score. Additionally, it may prevent people from taking on loans they cannot afford, which could lead to financial hardship.
On the other hand, supporters of universal loan access contend that this policy promotes equality and economic growth. Many people, especially those from disadvantaged backgrounds, may not have had the opportunity to build a good credit history. Denying them loans based solely on their credit rating could make it harder for them to improve their financial situation. Moreover, credit ratings may not always accurately reflect a person’s current ability to repay a loan, as circumstances can change quickly.
In my view, while credit ratings are important, they should not be the only factor in determining loan approvals. Banks should consider other aspects of an applicant’s financial situation, such as their current income and job stability. They could also offer smaller loans or financial education programs to help people build their credit responsibly.
To conclude, although good credit ratings are valuable indicators of financial responsibility, a more flexible approach to loan approvals would be beneficial for both banks and society. By balancing risk management with opportunities for financial inclusion, banks can contribute to economic growth while still protecting their interests.
Band 7 Essay Analysis
This essay demonstrates several qualities that contribute to a Band 7 score:
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Task Response: The essay addresses all parts of the task, presenting both views and the writer’s opinion. However, the ideas could be developed more fully.
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Coherence and Cohesion: The essay is generally well-organized with clear paragraphing. Cohesive devices are used (“On the other hand”, “Additionally”, “Moreover”), but could be more varied.
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Lexical Resource: The essay uses a good range of vocabulary, with some less common items (“financial hardship”, “economic growth”). There is some repetition (“financial situation”).
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Grammatical Range and Accuracy: The essay uses a mix of simple and complex sentence structures with generally good control. There are a few minor errors, but they do not impede communication.
Band 6 Sample Essay
Lastly, let’s look at a sample essay that would likely score in the Band 6 range:
Nowadays, there is a debate about whether banks should only give loans to people with good credit ratings or if everyone should be able to get loans. I will discuss both sides of this argument and give my opinion.
Some people think banks should only lend money to customers with good credit ratings. This is because these customers are more likely to pay back the loans on time. It’s safer for the banks and they won’t lose money. Also, it makes people try to keep a good credit score so they can get loans in the future. This might help people be more responsible with their money.
However, other people believe everyone should have access to loans, even if they have a bad credit history. They say this is more fair because some people haven’t had the chance to build a good credit rating. For example, young people or people who are new to a country might not have any credit history. If they can’t get loans, it might be hard for them to buy a house or start a business. This could be bad for the economy.
In my opinion, I think banks should look at more than just credit ratings when deciding about loans. They should also consider things like a person’s job and how much money they make now. Maybe they could give smaller loans to people with bad credit to help them improve their rating.
To sum up, while good credit ratings are important, I believe banks should be more flexible when giving loans. This could help more people and be good for the economy, while still being careful with the bank’s money.
Band 6 Essay Analysis
This essay demonstrates several qualities that contribute to a Band 6 score:
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Task Response: The essay addresses the task, presenting both views and the writer’s opinion. However, the ideas are not fully developed and some points lack specific examples.
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Coherence and Cohesion: The essay has a clear structure with introduction, body paragraphs, and conclusion. However, the use of cohesive devices is limited and sometimes repetitive (“Also”, “However”).
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Lexical Resource: The essay uses an adequate range of vocabulary, but lacks precision in places. There is some attempt at less common vocabulary (“responsible”, “flexible”), but also some repetition (“good credit rating”).
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Grammatical Range and Accuracy: The essay uses a mix of simple and complex sentences, but with limited flexibility. There are some grammatical errors (“more fair” instead of “fairer”), but they do not significantly impede communication.
Key Vocabulary for Credit Ratings and Loan Approvals
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Credit rating (noun) /ˈkredɪt ˌreɪtɪŋ/: An evaluation of a borrower’s creditworthiness.
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Creditworthiness (noun) /ˌkredɪtˈwɜːðinəs/: The extent to which a person or company is considered suitable to receive financial credit.
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Default (verb) /dɪˈfɔːlt/: Fail to fulfill an obligation, especially to repay a loan.
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Financial inclusion (noun) /faɪˈnænʃəl ɪnˈkluːʒən/: The availability and equality of opportunities to access financial services.
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Risk mitigation (noun) /rɪsk ˌmɪtɪˈɡeɪʃən/: The process of reducing the impact of potential risks.
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Collateral (noun) /kəˈlætərəl/: Something pledged as security for repayment of a loan.
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Debt-to-income ratio (noun) /det tə ˈɪnkʌm ˈreɪʃiəʊ/: A personal finance measure comparing an individual’s debt payments to their income.
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Underwriting (noun) /ˈʌndəˌraɪtɪŋ/: The process of evaluating the risk of lending or investing in a particular scenario.
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Credit bureau (noun) /ˈkredɪt ˈbjʊərəʊ/: An agency that collects and researches individual credit information.
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Interest rate (noun) /ˈɪntrəst reɪt/: The proportion of a loan that is charged as interest to the borrower.
Conclusion
Understanding how credit ratings affect loan approvals is crucial for IELTS candidates, as it’s a topic that frequently appears in Writing Task 2. By studying these sample essays and analyses, you can improve your ability to discuss this subject comprehensively and articulately. Remember to practice writing your own essays on this topic, considering different aspects such as financial inclusion, risk management, and economic growth. You’re encouraged to share your practice essays in the comments section for feedback and further improvement.
To further enhance your preparation, consider exploring related topics that might appear in future IELTS tests, such as:
- The role of technology in banking and finance
- Government regulations in the financial sector
- The impact of personal debt on society
- Financial education in schools and universities
- The pros and cons of cashless societies
By broadening your knowledge on these related themes, you’ll be better equipped to handle a wide range of potential essay questions in your IELTS Writing Task 2.