People who are considering applying for loans should first check their credit score and try to improve it, if it is low.
We have all heard of the need to have a good credit rating to increase our chances of getting our loan applications approved. Most financial experts advise people to maintain a good credit rating and 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 business credit scores based on data provided by banks and credit institutions. Lenders typically review an applicant’s CIBIL score before approving or rejecting their loan application.
While a good CIBIL score allows easy access to credit, a low CIBIL score makes it difficult. Most 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 is a car loan, a mortgage or a personal loan, a good CIBIL score will increase the chances of having it validated. With a CIBIL score above 700, you can expect 80% of the total cost of a property approved as a home loan.
How is that 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 in order to keep your score high.
Late payment
Even a single payment made after the due date can lower the credit score. When you delay payment after the due date, lenders see you as irresponsible when it comes to finances.
High use of credit limit
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 on the line.
Several credit requests
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 the money. When these lenders send credit applications to rating agencies, like CIBIL, they get a report on all of your loan applications showing your thirst for credit. It also suggests that you may not be able to repay if a loan is granted to you.
People who are 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.
