Credit monitoring and its impact on loan approvals is a topic that has appeared in IELTS Writing Task 2 essays with moderate frequency in recent years. Based on current trends and the increasing importance of financial literacy, we can expect this subject to continue appearing in future IELTS exams. Let’s examine a relevant question that has been seen in past IELTS tests:
Some people believe that banks should only approve loans for individuals with good credit scores. Others argue that this practice discriminates against those who need financial assistance the most. Discuss both views and give your own opinion.
Analysis of the Question
This question presents a balanced argument about loan approval practices based on credit scores. It requires candidates to:
- Discuss the viewpoint supporting strict credit score requirements for loans
- Explore the opposing view that this practice may be discriminatory
- Provide a personal opinion on the matter
Let’s look at sample essays for different band scores, starting with a high-scoring response.
Sample Essay 1 (Band 8)
The practice of banks approving loans based solely on credit scores is a contentious issue in modern finance. While some argue that this approach ensures responsible lending, others contend that it unfairly disadvantages those in genuine need of financial support. This essay will examine both perspectives before presenting my own viewpoint.
Proponents of credit score-based loan approvals argue that this system promotes financial stability and responsible borrowing. By only lending to individuals with proven track records of managing debt, banks can minimize the risk of defaults and maintain a healthy financial ecosystem. This practice encourages people to maintain good credit habits, such as paying bills on time and managing their debt responsibly. Moreover, it protects banks from potential losses, enabling them to offer more competitive interest rates to low-risk borrowers.
On the other hand, critics argue that this approach can be discriminatory and perpetuate economic inequality. Many individuals with low credit scores may be trapped in a cycle of financial hardship, unable to access the funds they need to improve their situation. For instance, someone who has faced unexpected medical expenses or job loss may have a poor credit score but still be capable of repaying a loan if given the opportunity. By denying loans based solely on credit scores, banks may be overlooking other important factors such as current income, employment stability, or future earning potential.
In my opinion, while credit scores should play a role in loan approval decisions, they should not be the sole determining factor. I believe a more holistic approach that considers an individual’s current financial situation, reason for borrowing, and potential for future financial stability would be more equitable and effective. Banks could implement alternative assessment methods, such as reviewing an applicant’s recent payment history, evaluating their debt-to-income ratio, or offering secured loans to those with lower credit scores.
In conclusion, while credit score-based loan approvals have merits in promoting responsible lending, an overreliance on this system can lead to unfair outcomes. A balanced approach that considers multiple factors would better serve both banks and borrowers, fostering financial inclusion while maintaining reasonable risk management practices.
(Word count: 345)
Credit score-based loan approval process illustrated
Explanation of Band 8 Score
This essay demonstrates the characteristics of a Band 8 response:
- Task Achievement: The essay fully addresses all parts of the task, discussing both viewpoints and clearly presenting a personal opinion.
- Coherence and Cohesion: Ideas are logically organized with clear progression throughout. Paragraphs are well-linked, and cohesive devices are used effectively.
- Lexical Resource: A wide range of vocabulary is used accurately and appropriately, with some less common phrases (e.g., “contentious issue,” “perpetuate economic inequality”).
- Grammatical Range and Accuracy: A variety of complex structures are used with flexibility and accuracy. There are no noticeable errors.
Sample Essay 2 (Band 6.5-7)
There is a debate about whether banks should only give loans to people with good credit scores. Some think this is a good idea, while others say it’s not fair to people who really need money. I will discuss both sides and give my opinion.
People who support using credit scores for loans say it helps banks make safe decisions. When banks only lend to people who have shown they can handle money well, they are less likely to lose money from unpaid loans. This also encourages people to be responsible with their finances so they can get loans in the future. It’s like rewarding good behavior.
However, others argue that this system isn’t fair. Many people have low credit scores because of things they couldn’t control, like losing their job or having expensive medical problems. These people might be able to pay back a loan if they were given a chance, but they can’t get one because of their credit score. This can make it hard for them to improve their situation.
I think banks should look at credit scores, but not only credit scores. They should also consider other things about a person’s financial situation. For example, they could look at how much money someone makes now, how stable their job is, and why they need the loan. This would give a better picture of whether someone can repay a loan.
In conclusion, while credit scores are important, I believe banks should use a more balanced approach when deciding about loans. This would be fairer and could help more people while still protecting banks from too much risk.
(Word count: 276)
Explanation of Band 6.5-7 Score
This essay demonstrates characteristics of a Band 6.5-7 response:
- Task Achievement: The essay addresses all parts of the task, presenting both views and offering a personal opinion.
- Coherence and Cohesion: There is a clear overall progression, though the use of cohesive devices is sometimes mechanical.
- Lexical Resource: An adequate range of vocabulary is used, with some attempt at less common items, though there may be occasional inaccuracies in word choice or collocation.
- Grammatical Range and Accuracy: A mix of simple and complex sentence forms is used, with generally good control, though there are some errors.
Key Vocabulary to Remember
Credit score (noun) /ˈkred.ɪt skɔːr/ – A number representing a person’s creditworthiness based on their credit history.
Discriminatory (adjective) /dɪˈskrɪm.ɪ.nə.tər.i/ – Treating a person or group differently, usually worse, than others.
Financial stability (noun phrase) /faɪˈnæn.ʃəl stəˈbɪl.ə.ti/ – The condition of having a financial system that can withstand shocks.
Perpetuate (verb) /pərˈpetʃ.u.eɪt/ – To make something continue, usually a bad situation, over a long period of time.
Holistic approach (noun phrase) /həʊˈlɪs.tɪk əˈprəʊtʃ/ – A way of dealing with a situation that considers all parts together, not separately.
Debt-to-income ratio (noun phrase) /det tʊ ˈɪn.kʌm ˈreɪ.ʃi.əʊ/ – The percentage of your monthly income that goes toward paying debts.
Financial inclusion (noun phrase) /faɪˈnæn.ʃəl ɪnˈkluː.ʒən/ – The availability and equality of opportunities to access financial services.
Creditworthiness (noun) /ˈkred.ɪt.wɜː.ði.nəs/ – The extent to which a person or company is considered suitable to receive financial credit.
Conclusion
The topic of credit monitoring for loan approvals is a complex and relevant issue in today’s financial landscape. As we’ve seen from the sample essays, this subject allows for discussion of various perspectives, including financial stability, fairness, and economic opportunity. When preparing for your IELTS Writing Task 2, consider practicing with similar topics that explore the balance between financial prudence and social equity.
Some potential related topics you might encounter in future IELTS exams could include:
- The role of financial education in reducing income inequality
- The impact of digital banking on access to financial services
- Government regulations in personal lending practices
To further improve your writing skills, we encourage you to practice writing an essay on the given topic and share it in the comments section below. This exercise will help you apply the strategies and vocabulary discussed in this article, enhancing your preparedness for the IELTS Writing Task 2.