Is your CIBIL score less? But need a personal loan? Learn what are the impacts of CIBIL score and what can be done to improve it. Looking to take a loan with a low CIBIL/Credit score? First, try to understand the credit score. At this stage, you’ll have more questions like how can you know about your CIBIL/Credit score?
The Credit Information Bureau (India) Limited (CIBIL) is a credit information company licensed by the Reserve Bank of India (RBI). A CIBIL/Credit score is the summary of your three-digit numeric credit card history, rating, and report; it ranges from 300 to 900. The CIBIL report comes within the score assistance of credit history. A Credit information report doesn’t contain details about your savings, investments, or fixed deposits, they just access your credit card payment history across loan types and credit institutions.
How is your CIBIL score calculated?
Your CIBIL score plays a key role after you make a loan request to any financial organization. Having a better CIBIL rating increases your loan application’s chances of sanctioning.
Every credit rating agency has its way of calculating the credit score for a consumer using different parameters. Before applying for your loan application, you need to have a transparent understanding to calculate your CIBIL score and to reduce the possibility of getting rejected because getting a loan with a low credit score from a financial organization is extremely difficult.
While each company has its algorithm to calculate a consumer’s credit score, the foremost important elements of a score composition are centric on the loan payment behavior of the individual.
The score is calculated in support of the subsequent factors:
Credit Utilization: What proportion of the credit is the consumer using?
Delinquency: How many accounts are past due, and how late they are?
Trade Attributes: What’s their credit type? Does the individual have a decent mix or balance of credit, or is it all credit cards?
Your CIBIL score report determines whether or not you qualify for a loan, but it’s going to also impact the terms and conditions you are about to avail yourself of for the loan. A personal loan for a low CIBIL score is hard to induce from the financial institutes, but if you want to avail a faster loan your chances will increase with a better credit score and you will get it on your favorable terms. It’s always advisable to check your CIBIL score before applying for a loan.
Why is CIBIL score important while applying for a loan?
If you’re looking to avail of a personal loan, one of the primary things that the lender will check is your CIBIL score for authorization. Financial organizations cannot sanction a personal loan with a low credit score.
Lenders like non-banking financial organizations and banks first check your checks your credit then proceeds to your application.
If you manage your finances well and have a decent credit history, you ought to have an excellent score. 750 or above is considered an excellent CIBIL score for a personal loan for many lenders.
Borrowers with lower CIBIL scores may have difficulty getting loans from financial organizations. They typically pay higher interest rates on loans or may even get rejected by the lenders.
To assess your eligibility, lenders also use various parameters like location, age, work experience, income stability, nature of the profession, etc. However, having a sound CIBIL score for loan approval goes an extended way in securing an acceptance from the lender of your choice when applying for a personal loan.
What is a bad CIBIL/ Credit score?
A credit score measures your creditworthiness presented in an exceedingly numerical format. It ranges between 300-900, 300 being the rock bottom and 900 being the best. It might be best if you mostly worked towards maintaining a credit score closer to 900.
A credit score within the range of 300-550 is taken into account as bad. If you’ve got a credit score that falls in this range, you must take serious measures to improve it. Having a bad credit score won’t make you eligible for a loan or get a credit card.
The factors that affect your credit score.
There are several factors restraining your credit score which will reduce your chances of getting a personal loan, and thanks to a bad credit score. Let’s take a look at some factors that can bring your credit score down:
Not checking your credit score.