Having a good CIBIL score is an important criterion to get a personal loan, and may even ensure you get a larger loan amount or a lower rate of interest. There are various ways you can improve your score and gain from the benefits of doing so.
A CIBIL score is a rating that is used to indicate the creditworthiness of any individual over a period of time. CIBIL (Credit Information Bureau India Ltd.) is a credit rating organization that is known to offer accurate credit scores and credit reports, working with over 2,000 lending companies, banks, financial institutions, NBFCs, etc. to maintain the records of over 550 million individuals.
CIBIL calculates your credit score based on a range of influencing factors such as past debt repayment, the length of credit history, credit card repayment, existing loan to be repaid, etc. A good CIBIL score can give you numerous benefits.
What Are the Benefits of Having a Good Score?
The
minimum CIBIL score for a personal loan is 700 points. Any score below that can hinder chances of your loan application getting approved. However, here are some benefits you can enjoy if you have a good CIBIL score.
1. Give you Higher Chances of Your Personal Loan Being Approved: A good score assures lenders that you are financially capable of repaying the loan and increases their confidence in lending you a loan.
2. Get you lower Interest Rates: If you have a good credit score, you will receive a lower interest rate.
3. Speed up the Processing of Your Personal Loan Application: If you have all your other documents and have a good CIBIL score, the lender is less likely to take the time to deeply scrutinize your application. This means that your loan would be sanctioned faster.
4. Allow You to Borrow More: A good credit score can also pave the way for you to get a larger loan amount sanctioned by your lender.
How is Your CIBIL Rating Calculated?
The CIBIL score calculation is done on the basis of your entire credit history. Thus, the CIBIL score is considered as the most accurate measure to approve a personal loan request by most lending institutions.
Here are the main factors that CIBIL evaluates to calculate your score:
a.) The Mix of Credit: The mix of credit means the compilation of various credits an individual opts for over time. These include credits like secured or unsecured loans, mortgages, credit cards, etc. It is important to have a healthy credit mix like various types of loans since individuals with a good mix of credits are likely to receive higher scores.
b.) Repayment of Debt: Simply borrowing is not the key to a good score. You also have to have a steady pattern of repayment. The more successfully and aggressively you repay, the higher is your score. Timely repayment of debt constitutes a large part of your CIBIL score.
c.) Scrutiny of Credit Cards and Credit Balance: CIBIL closely examines your credit card patterns such as the number of credit cards you own and your credit balance. The credit balance is the amount of money remaining on your credit card from the quota of credit provided to you by the lender over a period of time. A higher credit balance makes a good impression and gives you a good score. Too many credit cards damage your score, and your credit card repayment history also affects your credit score.
d.) Credit History: CIBIL also analyses your entire credit history. If you are an individual who has taken no credit in the past, you are likely to have a low CIBIL score.
Thus, you can see that there is a diverse range of factors based on which your CIBIL score for a personal loan is calculated. You can also
check required CIBIL Score for Personal Loan. Understanding these factors can help you work on improving your CIBIL score range. If you apply for a personal loan with low CIBIL score you may either end up having your loan application rejected or may need to pay a higher interest. However, if you give yourself some time and are ready to put in some effort, you can easily improve your credit score and get a personal loan to fulfil your financial needs.
How Can You Improve Your Credit Score?
Now that you know what goes into a CIBIL score calculation, you can work on improving it to ensure that your personal loan is approved. Here are some tips to keep in mind:
1. Keep a Healthy Credit Balance: If you are a credit card holder like most of us, then this tip applies to you. The higher the credit balance you maintain, the better are your chances to receiving a good CIBIL rating. This is because you come across as a balanced spender, rather than a borrower who spends recklessly.
2. Have a Healthy Mix of Debt and Repay All on Time: Ensure that you apply for a various mix of debt, as this positively impacts your CIBIL score. Needless to say, also make sure you pay all your EMIs all on a timely basis.
3. Make Sure to Prepay Sometimes: While servicing a loan or repaying your debt, ensure that you prepay once in a while. Prepaying a loan means repaying more than your monthly EMI. This will be recorded in your credit history, making you look like a borrower who wants to repay your loan before time, and someone who plans ahead to make this happen.
4. Pay off Outstanding Debts: When you want to quickly improve your credit rating, work on gathering funds which you can use to pay off all existing debt. This will clear your dues and boost your score.
5. Pay off Credit Card Debt With a Debt Consolidation Loan: If you have a lot of credit card debt, you can consolidate it all and pay it off via a debt consolidation loan. This will also reduce the high interest that credit card companies charge you.
6. Don’t Apply for any New Loans or Credit Cards Until Your Score Improves: Keep your debt to a minimum and don’t undertake new debt unless you want to build your credit history.
These tips will help you
improve your CIBIL score and get a personal loan that will come in handy no matter what your financial needs. If you have a good CIBIL rating and seek to borrow a loan, Bajaj Finserv, India’s most diversified NBFC, can provide you with instant personal loan approval with minimum documentation.