When banks and other lending institutions look at loan applications, the borrower’s Cibil™score is investigated. The score ranges from 300 to 900. If the score is higher, then the probability of faster loan approval and cheaper loans is higher. Generally, a CIBILTM score above 750 is regarded as good. Banks approve loans and issue credit cards to people with good CIBILTM scores. Your report contains the details about your credit history and credit score. Banks determine your financial discipline and whether or not you will repay your loan on time based on your CIBILTM report. Let us now understand how a good rating is beneficial.
The Benefits Of A Good CIBILTM Score
The advantages of a good CIBILTM score are as follows:
Cheaper loans:
Banks offer interest rates on loans based on the credit history and Credit Score of the borrower. If a borrower’s CIBILTM score is good, banks may give a lower interest rate compared to those with a lower score.
Faster loan approval:
Those who have a good CIBILTM score will have higher chances of faster loan approval. Financial institutions tend to approve loans faster for those with higher CIBILTM score.
Higher credit limits:
When financial institutions give loans with higher credit limits to borrowers, the risk involved is higher. So, financial institutions generally give loans with higher quantum to people with a good CIBILTM score.
Pre-Approved Loans:
If you have a good CIBILTM score, your bank may be able to offer you pre-approved loans or credit cards.
Cards With Perks:
credit and debit cards come with some perks and rewards. But, for those who have a better credit history and thus a good CIBILTM score, banks offer better benefits and rewards. Thus, it is really advantageous to have a good CIBILTM score.
Cheaper Interest Rates On Loans:
Having a good CIBILTM score will help in getting cheaper loans. Also, having a good credit score gives you greater negotiation power to get better interest rates from various offers given by multiple lenders. Getting an affordable interest rate on a loan is advantageous and can help you save a lot.
Loans with longer tenure:
You can get loans with longer tenure if you have a good CIBILTM score. When you have a longer tenure on your loan, your EMIs are less. However, you may end up paying more interest over the longer loan tenure.
Discount on loan processing fees and other charges:
You can obtain a discount on loan processing fees and other charges if you have a good CIBILTM rating.
How To Improve Your CIBILTM Score?
Here are some basic ways to improve your CIBILTM Score:
Repay Your Credit Card Dues On Time:
Repay your outstanding credit card amount completely. Repaying only the basic amount will help in avoiding late payment charges but it will add to taxes and interest in the next cycle and will lead to increased debt.
Pay Your Loans on Time:
If you have loans with delayed payments, then you should ensure that you pay them promptly. If you are struggling with the current EMI, then you can approach your bank to help you restructure your debt so that it is easier to pay.
Check Your Credit Report:
Check your credit reports regularly. This will let you know the defaults in loans or credit cards which have brought down your score. The second thing that it will tell you is the information recorded in your credit report. These two types of details help in fixing the credit score because if you feel that there are discrepancies in the details mentioned in the report, you can approach the bank and CIBILTM to get it fixed. Also, if you are aware of what transactions have a negative impact on your CIBILTM score, you can take steps to improve it.
Maintain A Lower Credit Utilization:
Use within 30% of your credit card limit. Using more than 30% of your credit card limit is considered as high.
Have a healthy mix of credit:
Banks view taking only unsecured loans as negative. This may lead to declining loans. So, you should have a good mix of unsecured loans like personal loans and secured loans such as car or home loans.
Don’t Keep Applying For Credit:
If you have applied for a loan or a credit card and your application has been rejected, the information will be recorded in your credit report. If you go and apply to another bank immediately, then they will see your low score and the previous rejection and may decline your application. The wise thing to do in such cases is to not apply again and wait for the score to improve.
Don’t Apply For Multiple Credit:
Each time you apply for credit, your bank will make an inquiry, and the inquiry gets recorded on your CIBILTM report. The enquiry by a bank brings down your CIBILTM score after each request for your report. Also, it shows credit hungry behavior which is negative. So, do not apply for multiple credits.
Don’t settle loans and credit cards:
Many times, people choose to settle a credit card or loan. This means that they approach the bank and ask for a deal that will enable them to close the debt for an amount that is lower than the actual amount due. Such settlements reflect on the credit report and will have a negative impact on the score or a bank’s willingness to provide new credit.
Conclusion
Thus, it is important to have a good CIBIL ™ score and having a high CIBIL ™ score has a lot of benefits. If your CIBIL ™ score is not up to the mark, you have to take steps to improve it
