A person with good financial management always has a better CIBIL Score. Banks avoid lending to individuals with lower CIBIL scores because they are seen to be less creditworthy, they borrow more and do not repay on time.
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How to improve CIBIL score: CIBIL score, is a three-digit numeric summary of your credit history which plays a major role for both borrower and the lender. It is derived using the credit history found in the CIBIL (Credit Information Bureau India Limited) report. The major factors which contribute to your credit score are – your payment history, length of credit history, credit mix, credit utilisation ratio, and credit enquiries.
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CIBIL score: What is a good CIBIL score range?
The CIBIL score ranges from 300-900 — 300 is considered a bad CIBIL score, while 900 is the highest score. In case you are planning to take a loan on a lower interest rate, your CIBIL score should be as close to 900 as possible.
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CIBIL score: Why does it matter?
A person with good financial management always has a better CIBIL Score. Banks avoid lending to individuals with lower CIBIL scores because they are seen to be less creditworthy, they borrow more and do not repay on time.
If a customer has a very high CIBIL Score, then an institution may provide him a loan with little to no documentation and a cheaper interest rate. Banks either reject a candidate’s loan application or allow it with higher interest rates if his CIBIL Score is deemed low. However, the applicant’s CIBIL Score is not the only factor used by banks to determine whether or not to provide them with a loan.
Commenting on managing credit scores, Aalesh Avlani, founder of Credit Wise Capital (CWC), said, “Consistent and responsible credit behaviour is key to building a good credit score in India. Pay your bills on time, use credit responsibly, and maintain a good credit utilisation ratio to improve your credit score over time. At CWC we provide a credit builder report to improve the ability to take future products on loan.”
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CIBIL score: Benefits of high credit score
- Lenders may give credit easily
- Quick loan approval
- Low-interest rate credits
- Easy approval for rented properties
- Exciting credit card offers
CIBIL score: How to increase your CIBIL score?
1- Pay dues on time – You should clear your dues on time. In you tend to forget due dates, then set reminders. It will save you to from late fees and maintain your credit score.
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2- Don’t repeatedly apply for credit if rejected – If you have applied for a loan or a credit card and your application has been rejected, then the information will be recorded in your credit report. If you go and apply to another bank immediately then they will see your low score and the previous rejection and reject your application. The best thing to do in such cases is to not apply again and wait for the score to improve.
3- Note your credit utilisation ratio – Make sure that you do not use your credit card for all transactions. Try and keep your credit utilisation ratio at 30 per cent or less. When you do this, you will see a positive impact on your CIBIL score.
4- Avoid taking multiple loans in a single time – Applying for multiple loans or credit cards in a short duration, can impact your CIBIL Score.
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5- Opt for different types of credit – Credit may be advantageous if utilised responsibly, as a person without any credit history has a lower CIBIL score, which makes it more challenging for them to get loans. By taking out a few loans, which may include a combination of secured and unsecured loans as well as long- and short-term loans, and repaying them diligently, you can enhance your credit history and raise your CIBIL score.
