CIBIL score is a 3 digit numeral assigned to Indian citizens by the Credit Information Bureau (India) Limited that reflects their creditworthiness or potential to avail loans. The higher the credit score the better the chances of getting loan approvals. Individuals having higher credit scores indicate their ability to repay loans on time.
Whereas people with lower credit scores may face loan rejections, higher interest rates, etc. Although the CIBIL score ranges between 300 and 900, keeping it above 750 can be sufficient to avail great advantages from lenders.
How to compare CIBIL scores?
The more the cibil score range, more the credit score the better the advantages in loan applications and approvals. Individuals having low credit scores between 300 and 500 are considered poor and hence they face loan rejections from lenders.
On the contrary, if anyone has a credit score of 800 or above, not just timely loan approval, he/she will receive various advantages from lenders. These include reasonable interest rates, convenient EMIs, flexible tenors, pre-approved offers, and more.
What are the ways to improve CIBIL scores?
Individuals can enhance their CIBIL score by keeping several things in mind and following them meticulously:
- Periodically checking CIBIL score online as well as the credit reports
- Keeping an eye on the credit utilisation ratio
- Avoiding too many loans simultaneously
- Opting for a credit mix
- Repaying loans and credit card payments on time
- Staying away from quick credit score fixes
What are the advantages of retaining a healthy CIBIL score?
Precisely, the minimum CIBIL score for a loan is 750 or above is considered the best among most lending institutions. Here are the advantages of retaining a healthy CIBIL score:
- Reasonable interest on loans
In India, lenders have priced the loans in accordance with the risk profile of borrowers. This has ensured that borrowers having an excellent high credit profile and a healthy CIBIL score will get benefits like lower interest. This is essential because even half a proportion of the increase in the rate of interest can impact one’s EMIs and subsequently, his/her finances. Thus, it is recommended for an individual to keep a credit score of 750 or more in order to get this interest benefit.
- Faster approval on loans or credit cards
A good CIBIL score is an indicator of an individual’s creditworthiness. This enables the lending institution to make decisions regarding his/her loan or credit card applications at a quicker pace. Besides, if a borrower has a good credit score, he/she can get instant credit approval in case of emergencies.
- Better negotiation power with lenders
Every lending institution prefers offering loans to creditworthy individuals who have the potential to repay the entire loan amount within the stipulated time. Furthermore, if a person has an excellent credit score of 800 or above, he/she can negotiate with the lender to get the loan at a lower interest rate or lesser processing charges.
- Get higher limits on credit card
Higher limits on credit cards are usually determined as per an individual’s CIBIL score and monthly income. If a cardholder has a healthy credit score, it becomes easier for the card issuer to increase his/her credit limit down the line. This is because a higher credit score reflects responsible credit behaviour and thus, decreases the risk factor for lending institutions.
- Get higher limits on loans
Precisely, in case of unsecured loans like personal loans, business loans, etc., where no collateral is involved, lending higher amounts of credit often becomes risky for the lenders. This is because if the borrower fails to repay the loan amount they have no option to fix that damage. However, if the individual has a healthy CIBIL score of 800 or more, the lender may agree to approve the loan request since a higher credit score reflects better repayment potential.
- Enjoy a long repayment tenor
Another outstanding advantage of retaining a healthy credit score is that the borrowers can get a repayment longer tenor while availing a loan from the lending institution. With a flexible period for repayment, borrowers enjoy the benefit of paying reasonable and convenient EMIs.
- Access to pre-approved offers
Often lending institutions offer pre-approved loan offers to their old customers or borrowers having exceptional credit scores. However, one can access these offers only if he/she retains good financial discipline.
Many reputed lending institutions provide pre-approved offers on personal loans, business loans, LAP, home loans, etc., which helps in expediting the lending procedure. Individuals can check their pre-approved offers online by entering their names and phone numbers.
In a nutshell, the CIBIL score ranges between 300 and 900. People having a low credit score can face multiple issues from their lenders such as high-interest rates, lower credit amounts, or even loan rejection. This is why it is essential for borrowers to keep a healthy credit score and monitor the CIBIL report periodically.
