People considering applying for loans should first check their credit rating and try to improve it, if it is low.
We’ve all heard of the need to have a good credit score to increase our chances of getting our loan applications approved. Most financial experts advise people to maintain a good credit score to even enjoy other benefits on their loans, such as lower interest rates, higher amounts, and a longer repayment period. CIBIL is one of the RBI Approved Credit Rating Agencies in India responsible for generating personal and corporate credit ratings based on data provided by banks and lending institutions. Lenders usually review the applicant’s CIBIL score before approving or rejecting their loan application.
While a good CIBIL score facilitates access to credit, a low CIBIL score makes it difficult. More importantly, a good CIBIL score will give you the flexibility to choose your lender, as several banks and other financial institutions will be willing to give you a loan.
What is a good CIBIL score?
A CIBIL score is considered good if it is between 700 and 900. It doesn’t matter what type of loan you are looking for. Whether it’s a car loan, a home loan or a personal loan, a good CIBIL score will increase the chances of getting it approved. With a CIBIL score above 700, you can expect up to 80% of the total cost of the property approved as a home loan.
How is it determined?
Many people are unaware that they are unwittingly doing things that lower their credit score. It is therefore important to know what actions you should avoid to maintain your high score.
Late payment
Even a single payment made after the due date can reduce the credit score. When you delay payment after the due date, lenders view you as irresponsible when it comes to finances.
High credit limit usage
Lenders set a credit limit for each consumer based on their income and debt service ratio. The credit limit indicates how much money the consumer can spend on refunds after meeting other commitments. Regularly using more than 50% of the credit limit can put your credit score at risk.
Multiple credit applications
If you have applied for a loan from several lenders in a short period of time, it shows that you are in desperate need of money. When these lenders send credit applications to credit rating agencies, like CIBIL, they receive a report of all your loan applications showing your thirst for credit. It also suggests that you may not be able to repay if you are granted a loan.
People considering applying for loans should first check their credit score and if it is low, try to improve it by maintaining financial discipline or improving other factors leading to low credit score.
