For a quick and easy loans, having a good credit score is very much essential. Credit score/CIBIL score is the first thing that gets checked by the lender when you apply for any type of loan. Every individual has his/her own credit history and the score assigned to it. Basically, credit score is what represents your credit history. The information such as total debt you carry, the way you pay your bills and how well you have been managing credit is what reflected in the credit report in the form of score. Your repayment capacity is assessed based on the CIBIL score.
How lenders use your CIBIL scores?
Generally, CIBIL score ranges from 300(the lowest) to 900 (the highest). Anything above 750 is considered as a good credit score. Having a good credit score gives a confidence to the lender that you will repay the money that you borrow. Hence, it’s easy to get the loan when you have a higher credit score. Lenders may even offer you loans at lower rate of interest and fees with a very good credit score. On the other hand, anything below 500 is considered as poor credit score. Having a poor credit history is gazed as inefficient management of credit. Hence, it’s hard to get the loans approved with poor credit score.
Basically, closer you are to the highest score, lender will be more confident on your ability to repay. Hence, chances of getting the loan approved quickly at a reduced cost is higher. CIBIL analysis says, 79% of loans and credit cards approved for individuals with a CIBIL score greater than 750. However, healthy credit score is important, but not the only factor that is considered by lenders while advancing loans.
Impact or benefits of good CIBIL score on your loan application
A good CIBIL score can benefit you in many ways while availing credit from banks and NBFC’s (Non-Banking Financial Corporations). Some of the benefits are:
- Easy credit facility: Lender considers various factors like occupation, age, income source, relationship with the bank (if bank is the lender) along with your credit score. However, having a good credit score increases your chances of getting loan easily.
- Quick approval for loan application: If all the other details and documents are in place, having a good CIBIL score can get you quick approval for getting your loan application processed.
- Lower rate of interest: Relatively lower rate of interests are offered to individuals with excellent CIBIL score.
- Higher credit limits: With good score, you not only get loans at lower rate but also will have high chance of getting eligible for higher loan limits.
- Negotiation power: when you have a good CIBIL score, you will also have the power to negotiate for interest rate and other loan terms.
However, individuals with lower CIBIL scores may also sometimes get the loan but at higher rate of interest. Knowing what factors affect credit score can you in improving the score. You credit repayment history, multiple loan applications, availing more unsecured loans and credit utilisation limit etc are the certain key factors that influence your credit score. CIBIL scores play a crucial role in your financial journey. For a smooth journey, ensure to maintain good CIBIL score.