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People planning to apply for loans must first check their credit score and try to boost it, if low
We all have heard about the need for a good credit score to increase our chances of getting our loan applications approved. Most finance experts advise people to maintain a good credit score to even avail of other benefits on their loans, like low interest rates, higher amounts, and a longer repayment period. CIBIL is one of the RBI-approved credit rating agencies in India responsible for generating credit scores of individuals and businesses based on the data provided by banks and lending institutions. Lenders usually look at the CIBIL score of the applicant before approving or rejecting their application for a loan.
While a good CIBIL score provides easy access to credit, a low CIBIL score makes it difficult. Most importantly a good CIBIL score will give you options to choose your lender as multiple banks and other financial institutions will be willing to give you a loan.
What’s a good CIBIL score?
A CIBIL score is deemed good if it is between 700 and 900. It does not matter what kind of loan you are seeking. Whether it’s a car loan, home loan, or a personal loan, a good CIBIL score will increase the possibility of getting it approved. With a CIBIL score above 700, you can expect up to 80 per cent of the total cost of property approved as a housing loan.
How it’s determined?
Many people remain unaware that they unintentionally do things that lower their credit score. So, it’s important to know what actions you should avoid 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 in matters related to finances.
High utilisation of credit limit
Lenders set a credit limit for every consumer depending on their income and debt-service ratio. The credit limit suggests how much money the consumer can spend on repayments after meeting their other commitments. Utilise more than 50 per cent of the credit limit on a regular basis can put your credit score at stake.
Multiple credit applications
If you have applied to multiple lenders for a loan within a short span of time, it shows you are desperate for money. When these lenders send credit enquiries to rating agencies, like CIBIL, they get a report about all your loan applications showing your hunger for credit. This also suggests you may not be able to repay if granted a loan.
People planning to apply for loans must first check their credit score and if it’s low, then try to boost it by maintaining financial discipline or improving other factors leading to the low credit score.
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