Are you planning to take a personal loan? Are you worried about the high rate of interest levied by lenders? Do you want your loan to be processed and approved quickly? The remedy to all your queries lies in a good CIBIL score. If you have questions related to the CIBIL score, then read on.
What is a CIBIL Score?
According to RBI, there are three rating agencies in India. One of them is Credit Information Bureau India Limited (CIBIL). It provides credit scores to individuals and companies based on several parameters related to financial health.
TheCIBIL score is a three-digit numerical value with a range of 300-900. A high credit score(above 750) is considered creditworthy with responsible behaviour and financial stability to repay the loan amount with interest. Low credit score(below 300) are not usually considered for loans by lenders, as it indicates defaults and late payment issues or dues.
What factors affect CIBIL score?
Some of the factors that affect your CIBIL score are:
- Payment History
It takes around 18 to 36 months of credit usage to get a credit score. This history is instrumental in getting a good CIBIL score. Any default or late payment or delay in clearing bills gets reflected in your credit history and negatively impacts your credit score. It implies irresponsible financial behaviour and creates doubt on your financial stability.
- Unsecured loans
An increasing number of unsecured loans, credit cards may adversely impact your credit score. A balance needs to be maintained between the secured and unsecured loans.
- Credit utilization
Credit utilization should be 60% of your credit limit. Increased utilization or over-dependence on credit cards reflects negatively on your financial behaviour.
- Multiple loans
If you are servicing multiple loans and have credit cards, it may affect your credit score negatively.
How to Check your Credit Score for free?
Check free Credit score by following simple steps:
Step 1: Visit any financial institution webpage
Step 2: Enter the applicant’s first and last name
Step 3: Enter your valid e-mail ID and mobile number.
Step 4: The applicant will receive OTP on mobile for verification
Step 5: Verify your gender and age.
Step 6: Credit score and report is displayed.
What are the Advantages of the CIBIL Score?
A high CIBIL score has many benefits, these are:
- Ease in Loan processing
A high score indicates creditworthiness and the financial stability to repay the loan amount without default. It eases the entire loan processing and approval for the applicant. Individuals with low score need guarantors to get the loan.
- Low-Interest rate
Individuals with a high score are considered less risky prospects by lenders and hence loans are offered at low rates in comparison to individuals with low scores.
- High Loan Amount
A high score implies less risk of default and financial stability of an individual, thus lenders do not mind extending a higher loan amount.
- Credit Cards with added advantages
Individuals with a high score also get offers of credit cards with higher limit from different banks. Other offers like cashback, discounts, etc are extended to the eligible applicants.
CIBIL score is an important parameter looked at by lenders before processing loan application. Through financial prudence and taking effective timely steps, one can build a high score.
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