What is CIBIL? and What's Importance of CIBIL Score?
When you're thinking about taking out a loan, it's important to ask yourself, "What's my credit rating?" The CIBIL score is the credit score provided by TransUnion CIBIL in an individual's CIBIL report. It's a three-step process.When you are considering applying for a loan, you should ask yourself, "What is my CIBIL score?" and What's Importance of CIBIL Score? It has a score that ranges from 300 to 900 and is based on your credit history. A CIBIL score of 750 or higher reflects prudent credit behavior tendencies, whereas a score of 500 or less is considered a low CIBIL score.
The borrower's payment history, the number and types of loan accounts, outstanding and initial loan amounts, credit inquiries, and any guarantors on the loan all contribute to determining CIBIL scores. Banks and financial institutions each have their own criteria for what constitutes a satisfactory CIBIL score.
In the loan application process, the CIBIL score holds significant importance. When someone applies for a loan at a bank or financial institution, the lender first examines the applicant's CIBIL score and report. If the CIBIL score is poor, the bank may reject the application outright. Conversely, if the CIBIL score is high, the lender will review the application further and consider additional factors to assess the applicant's creditworthiness.
The CIBIL score acts as the initial impression for lenders; a higher score increases the likelihood of the loan being reviewed and approved. The decision to lend rests with the bank, and CIBIL does not play a role in determining the approval of the loan or credit card.
A score of 700 is generally considered good in most cases.
Why does the CIBIL credit score matter?
Your CIBIL credit score is akin to your financial reputation. It matters because it reflects how responsibly you manage borrowing money.Lenders use it to decide whether to give you a loan or a credit card and what interest rate to offer you.
A high score means you're seen as trustworthy and reliable, making it easier to get approved for loans and better deals. Therefore, maintaining a good score is crucial for achieving your financial goals and opportunities!
How to Improve Your CIBIL Score?
Want to make your financial future brighter? It's all about boosting your CIBIL score! Start by paying your bills on time, every time. Keep your credit card balances low, and don't go over your limit. Try not to apply for too much credit at once, and keep an eye on your credit report for any mistakes. By taking these simple steps, you'll be well on your way to improving your CIBIL score and unlocking better opportunities for loans and credit cards!
What's Factors affecting the CIBIL score?
While the specific algorithm for calculating a CIBIL score based on an individual's credit history is confidential, several known factors influence your score, including the following:
Repayment: Paying your loan EMIs and credit card dues on time is possibly the most crucial thing to remember. While this may appear to be a basic guideline, failing to observe it is a common and readily avoidable mistake. While skipping the payment due date once or twice in a decade may not have a substantial influence on your CIBIL score, doing so regularly will. That isn't all, though. Settlement or defaulting on a loan or credit card dues can have a long-term negative influence on your CIBIL score. Such behaviors have a long-term negative impact on your score (up to 7 years).
Credit Utilization Ratio: This is a simple calculation that compares your current outstanding debt to your given credit limit on all active credit cards and loans. Ideally, you should keep this below 30%, i.e., limit credit utilization to 30% or less of the allotted limit across all kinds of credit. Reduced credit utilization indicates financial responsibility, thereby enhancing your credit score.
Credit Mix: In India, credit can be of two types: secured credit, such as home loans, car loans, secured credit cards, etc., and unsecured credit, such as personal loans and credit cards. Having too much unsecured credit can make it appear as if you're more likely to default in the future. Having a healthy mix of secured and unsecured credit will help you keep your CIBIL score high.
Age of Credit History: The longer you've had credit cards or loans, the better your CIBIL score will be, assuming you've handled them properly. A longer history of prudent credit use indicates that you are more likely to be fiscally prudent in the future. This is also included in your CIBIL score; however, the impact of credit history age is likely to be less significant than that of repayment history.
Factors that don’t affect the CIBIL score
What factors have no bearing on your CIBIL score?
Aside from payment history and credit exposure, a variety of other factors influence your credit score. However, some elements will have no bearing on your final score. Here is a list of them:
Obtaining a copy of your credit report
Savings Account
Fixed Deposit
Debit Card
Income
Overdraft
Cheque bouncing
Education
Advantages of the CIBIL Score
A high CIBIL score provides you with a variety of advantages over individuals who have no CIBIL score or a low score. If you have a high CIBIL score, you are eligible for the following benefits:
Easy Credit from Lenders: A strong CIBIL score facilitates obtaining loans and credit from lenders, as it assures them of your reliability in repaying loans on time.
Quick Loan Approval: A high CIBIL score signals that you are a trustworthy borrower, prompting banks to expedite the loan approval process. In contrast, borrowers with lower credit scores must submit extensive paperwork and secure guarantors, making the loan disbursement process more time-consuming.
Low-Interest Credits: People with a good CIBIL score are eligible for loans with a lower interest rate. Those with a poor credit rating are given loans and credit at higher interest rates.
More Negotiation Power: If you know your CIBIL score is high, you have the power to negotiate a lower interest rate.
Exciting Credit Card Offers: People with a high CIBIL score are eligible for a variety of credit card offers from various institutions. These cards come with bigger credit limits, more benefits, and incredible deals and cashback.
Chances of Getting a Long-Term Loan: A loan with a longer term has lower EMIs, which is better for your monthly budget.
Pre-approved loans from banks are more readily available. A bank's pre-approved loan is a terrific way to receive a rapid personal loan from them.
Easier to Get Higher Limits on Your Credit Card: Higher credit card limits are usually determined by your credit score and your income. Your card issuer will be more likely to increase your credit limit if you have a good credit score.
How to Rebuild Your CIBIL Score After Financial Hardship
Financial Reflection: Begin by introspecting your financial landscape. Analyze your debts, missed payments, and current expenses with a keen eye.
Crafting a Viable Budget: Forge a budget blueprint that mirrors your earnings, expenditures, and debt repayments. Prioritize settling high-interest debts as a cornerstone of your financial revival.
Punctuality in Payments: Adhere strictly to due dates for bill payments and EMIs. Employ reminders or automated payments to sidestep the pitfalls of tardiness.
Being Alert: Regularly scrutinize your credit report for discrepancies or errors. Promptly contest any inaccuracies to ensure precision in your financial records.
Perseverance and Patience: Remember, Rome wasn't built in a day, and neither is a solid credit score. Stay steadfast in your repayment strategy and responsible fiscal habits, as they are the bedrock of your credit resurrection journey.
How do I acquire the loan at a low CIBIL?
You can acquire the loan at a low CIBIL from Chintamani Finlease in the following ways:
Before applying for a loan, ensure that you meet the following requirements:
age
18 years and above
Employment type
Salaried and self-employed
Minimum net income
Rs. 30,000/-
Work experience
Salaried - Employed for a minimum of 6–12 months.
Self-employed must have a minimum business tenure of 3 years.
Please send all of the papers listed below to operation@chintamanifinlease.com:
Last three months' salary slips or last three-year income tax return from the date of application.
Last three months' bank statement.
KYC documents as requested.
Electricity bill (private property)/Rent agreement (rented property).
Conclusion
In conclusion, your CIBIL score is a critical factor when applying for loans or credit cards. It represents your financial reliability and influences lenders' decisions on whether to approve your application. Maintaining a high CIBIL score opens doors to various financial opportunities, such as quick loan approvals, lower interest rates, and better credit card offers. By understanding the factors that affect your score and practicing responsible financial habits, you can improve your creditworthiness over time. Chintamani Finlease is here to assist you in navigating the loan application process and achieving your financial goals. Remember to provide all necessary documents and meet the eligibility criteria to increase your chances of securing a loan with a low CIBIL score. Take control of your financial future today by partnering with us!
If you have any further questions, please don't hesitate to contact us:
216, Ansal Vikas Deep Building, Laxmi Nagar District Centre,
Near Nirman Vihar Metro Station, Delhi, 110092.
Phone: (+91) 9212132955
Email: info@chintamanifinlease.com