CIBIL Score is an important factor that determines your personal loan eligibility. Lenders consider this score to be significant as it helps them assess your credit profile and ascertain your creditworthiness. Having a high credit score helps you get a personal loan at a nominal interest rate, whereas a low score can get you the loan at a high-interest rate or can lead to loan rejection even.
What score is considered to be a good CIBIL Score?
CIBIL Score is generated by TransUnion CIBIL, one of the leading credit bureaus in India. The score ranges between 300-900 with 300 considered to be the lowest and 900 the highest. A score between the range of 300-549 is considered to be poor, whereas, the score between 550-750 is considered to be fair. Lenders usually approve loan applications of individuals having a credit score of 700 and above.
Having a good credit score helps you get your loan approved faster at a low-interest rate which makes it one of the important eligibility criteria. If your loan has been rejected or you are new to credit, then here are five ways by which you can boost your credit score to boost your loan eligibility.
Five ways by which you can improve your credit score
Pay off all your existing debt: Outstanding debt in your credit portfolio can have a negative impact on your credit score, thereby leading to the rejection of your loan application. So, if you have any existing debt in the form of credit card bill or outstanding loan, then you must it pay off as per the given timeline or foreclose it to boost your CIBIL. Defaulting on loan payments has a negative impact on your score, whereas making timely repayment can boost the score. Additionally, avoid taking too many loans at one time or even making too many applications.
Maintain a limited credit utilization ratio: Having a high credit limit surely implies you to utilize the amount as per your wish. However, if you are looking to increase your credit score then you must keep your credit usage to a minimum. Utilizing a high amount of credit each month displays your credit hungry behaviour and implies that you are unable to make ends meet with your monthly income. Therefore, ensure that you utilize only as much as credit you can repay and don’t exceed more than 30%-40% of your credit limit. Also, avoid paying only the ‘minimum balance amount ‘on your credit card and make full payment and do not close your old credit card as you may lose your old credit history.
Build a mixed credit profile: When getting a loan, you can either opt for an unsecured loan or secured loan. Availing a secured loan requires you to pledge your asset as collateral, whereas, an unsecured loan does not require you to keep any collateral. Borrowing only one type of credit does not increase your credit score, therefore, you must have a mixed credit portfolio of secured and unsecured loans. Having a mixed bag of credit and being able to repay the EMIs on time shows your ability to handle any type of finances.
Check for discrepancies in your credit report: In certain cases, there may be discrepancies in your CIBIL report wherein your credit repayment details are not updated due to which your CIBIL score may be low. Due to this. It is important that you check your CIBIL report frequently. In case you find any incorrect information, then it is recommended that you report the matter to the CIBIL directly to ensure that your CIBIL score is not affected. You can solve the errors in your CIBIL report by submitting a CIBIL dispute resolution form online. Before availing a personal loan, do check your personal loan eligibility which is majorly influenced by your credit score. Therefore inculcate the habit of checking CIBIL report frequently to ensure your loan application is not rejected.
Choose long tenure when availing a loan: When you borrow a loan, opt for a longer repayment tenure. This ensures that your monthly EMI flow is low and you can repay the loan on time as per the given schedule. Not delaying or defaulting on the EMI payment will improve your CIBIL score.
Conclusion
Even though you may have a pre-approved loan offer from your bank or any online lender, you may not essentially be able to avail the loan if you have a low credit score. Following the above five tips will help you improve your credit score over a period of time. Remember, your credit score is one of the important personal eligibility criteria that lenders ascertain when checking your loan application. Having a low credit score will deny you any type of loan, whereas, a high credit score will lead to quick approval of the loan that too at a low-interest rate.