CIBIL Score – The Entire Chapter
Every Individual like dreaming about accomplishing something unique. Some want to follow their passion whereas others just want to comfort their families. Most of the dreams fade away because there aren’t sufficient funds to transform it into a reality. With recent developments, loans have become a dreamers’ friend in helping him/her achieve a goal. It permits them to not worry about the financial situation. There are various types of loans that are available today. One can tap in any of them to receive help from an NBFC or bank. However, these financial institutions cannot just go on lending money to anyone. They can only lend it to those who are willing to repay and are financially stable to do so.
However, how would they determine the financial capabilities of a person? Well for that reason, there is something known as the CIBIL Score.
A CIBIL score is also known as Credit Score which is provided by the Credit Information Bureau of India. The score plays an important role by helping the financial institution to determine the financial capabilities of a borrower. However, it works two way, and thus even the borrowers can check their CIBIL score to understand their financial capabilities before they approach a Non-Banking Financial Company (NBFC) or a bank.
A CIBIL score acts as a base and helps the lenders to determine the credit quantum to be provided to the borrower. The CIBIL score starts from 300 as the minimum limit and 900 as the maximum. It helps in determining the credit worthiness. A low credit score means a lower trust in a borrower’s ability to repay the loan and vice-versa.
How does CIBIL score affect loans:
● Payment History: CIBIL score considers every financial detail and then determines the score. Under this, the financial institutions track your payment history with regards to outstanding amount, the volume of transaction and so on.
● High Utilisation of Credit Limit: Borrowers are often provided with credit limits. Financial institutions expect them to use it optimally. Borrowers who exhaust their limit witness their CIBIL score getting affected negatively.
● Higher Percentage of Credit Cards/Personal Loans: The lender considers the credit cards and personal loans that the borrower has. If a person has numerous loans and is successfully able to manage them, financial institutions vest their trust in such a borrower.
● Recent New Accounts: CIBIL score has every financial detail. With the help of CIBIL score, NBFCs and banks can learn about the transaction behaviour. Moreover, if you have recently opened an account and are looking to avail a loan, that is highly unlikely as the lender does not have enough information to parse.
How Can I Improve My CIBIL Score?
There are several ways through which you can improve a bad credit score. Below is the list of some of the points that you must consider if you are looking to improve your credit score:
● Pay Dues on Time
● Maintain Low Balances
● A Healthy Mix of Credit
● Moderation in New Credit Applications
● Monitor All Accounts Carefully
● Review Credit History
What If I Have A Bad CIBIL Score And Need A Loan Urgently?
Bad CIBIL score can often hurt your dreams and aspirations about obtaining a loan. However, even if you have a CIBIL score below 750, you can still approach the right lender. There are NBFCs such as Bajaj Finserv who offer loans at an attractive rate of interest and provide flexible tenors. Not just that, they are one of the most highly certified NBFCs providing quick disbursal with easy formalities.