A numeric representation of your repayment history is called a CIBIL score or credit score. When you apply for a credit facility such as loan or credit cards, the lender inspects your CIBIL score and your credit history.
According to the score and credit history, your application can further progress. So, it is highly essential to maintain an excellent CIBIL score for a loan.
Different lenders have different parameters when it comes to providing a loan, though, the range of the CIBIL score is often similar.
A good CIBIL score is a score at or above which you can avail of a loan without any issues at the lowest interest rates; following your documents and eligibility check. A score of 700 and above is said to be a good CIBIL score to avail a loan.
This score ranges between 300-900; any score close to 900 is perfect to avail of a loan with incredible perks.
The score is one of the elements to be checked before advancing any loan application. Furthermore, some lenders and NBFCs may ask for a higher score for an unsecured loan.
How is a CIBIL Score Calculated?
A CIBIL or credit score is calculated based on a few factors, especially on your payment records and credit history. The repayment track record of an individual donates to over 35% of weight while calculating a credit score. Additionally, a CIBIL score also determines based on:
- Total available credit balance
- Number of loans and credit card one has
- Credit usage
- Plus several other factors
A credit scoring algorithm is then utilised to determine the credit score. Your CIBIL score not only assists lenders to craft your loan eligibility, but it also helps them to understand your creditworthiness. The higher your credit score, the higher are the chances to acquire your loan approval. So, it’s essential to check your CIBIL score for a loan.
Perks of Having a Good CIBIL Score
Indeed, in no way, it means if you have a bad CIBIL score, you can’t acquire a loan or a credit card. Most people obtain loans and also employ credit cards even if they have a bad CIBIL score.
However, there are some perks of being on the right side of the scale, and those perks can be beneficial for you in the long run. Here are a few of the perks of maintaining a good CIBIL score to avail a loan:
- As the CIBIL score directly connects with your payment history and credit record, it is essential to keep good records. If you have excellent records, then you’ll get a good credit score that will ultimately increase the eligibility for a loan. With an ideal score, more and more lenders will be interested in providing a loan to you.
- Not only it impacts your loan eligibility, but it also influences your chances of getting a fantastic credit card. Most of the tremendous credit cards need a specific score that will be provided to you only if you have good credit or CIBIL score.
- People with a positive payment history and credit score are most likely to acquire lower rates on loans in addition to your current repayment ability.
- Even if you have a zero credit history and score, you can still start to build a good credit history. When you begin utilising your credit card or pay EMIs on time, your credit history will lift up and so will your credit score. It will enhance your eligibility for much better options in the future.
Importance of maintaining your CIBIL Score
A CIBIL or credit score is just like a fingerprint as it provides a picture of your financial health and how responsibly you use your money. Some individuals have no idea about the credit scoring procedure until they apply for a loan.
It is then; you realise that taking a few small steps daily to make a good CIBIL rating would have given you different outcomes. The realisation might be a little late as your loan application would have been rejected by now. That will bring you to the path of enhancing your CIBIL score for a business loan.
Here are a few ways in which your CIBIL report affects your finances:
With a low CIBIL score, there are higher chances of your loan application to be rejected. The lender might take you as high-risk and hence avoid lending you a loan. It results in financial conclusions of not being able to avail a loan at affordable rates to suit your business requirements, personal or educational needs. Most lenders and NFBCs have more relaxed loan eligibility criteria. Though, they may charge a higher rate of interest. They will pull out your credit report to get a clear view of your credit history. The CIBIL score is a sign of your creditworthiness and hence, reliability. It also decides the rate of interest you end up paying on your loan.
Uplift your CIBIL Score for a Loan
To get perfect deals on loans and credit cards, it is vital that you have an excellent CIBIL score. Maintaining an ideal CIBIL rating is crucial if you want a loan. There are various measures to enhance it. Some of them are mentioned below:
- Pay credit card bills on time
- Pay your EMIs on time, if any
- Avoid unwanted expenditure
- Apply for a loan or credit card, but not frequently
Check CIBIL Score for a Business Loan
ZipLoan is a reputed platform to find amazing loan deals at low interest rates. It is highly important to check your CIBIL score before you apply for a business loan. This way, you’ll know your creditworthiness and can choose the lenders accordingly. You can check your CIBIL score by following the below-mentioned steps:
- Initiate the procedure by filling up a form on the official website of CIBIL.
- Enter all your personal details asked, such as name, address, and phone number
- Once you submit the form, your CIBIL score and credit report will be mailed to you in a few hours.
A good CIBIL score range 2018 and 2019 is 700-739, and now it has been quite constant.