CIBIL score is a boon for applying for a Bank Loan: If you are looking forward to taking a bank loan, your CIBIL score will play a very important role in the whole process. Be it home, car, or any other personal loan, a good credit score would make the processing of your loan faster, along with a lower interest rate. But what does this mean specifically, what is the ideal CIBIL score for the loan, and how to improve it? Let’s see it in very simple words.
Why Your CIBIL Score Counts for Loans
If you use any credit card or take a loan, your way of paying the money will feed data into your CIBIL score. In the future, this will determine whether you are a creditworthy customer, as defined by your CIBIL score, which will be between 300 and 900. Banks and other financial institutions base their decision heavily on that score to judge whether to loan you money or not.
- CIBIL Score: 750+: It is considered good; it enables any individual to be eligible for most loans at very competitive interest rates.
- CIBIL Score: 800+: Excellent qualifies for the best available loan deals, with lower interest rates, and all premium benefits from insurers.
- Below 700 CIBIL Score: This can mean loan rejections or higher interest rates for riskier borrowers.
As well as being useful for loans, a CIBIL score will reduce unemployment within the banking sector and act as a passport to reduce insurance premiums.
How to Get a Loan with Low CIBIL Score
So, your CIBIL score is low now, but don’t be sad. Here are a few options for you :
- Secured Loans: Offer either property or gold as collateral since the risk assumed by the lender is lower.
- Secured Credit Cards: These cards are attached to a fixed deposit (FD) and will help you rebuild your credit profile by keeping payments on course.
- Co-applicant or Guarantor: Sign up with one who has a good credit score to gain more chances of being considered, in case of approval.
But you must remember that defaulting on loans or credit cards brings an extremely bad effect on your score and subsequently makes it too hard to borrow.
Can Bad CIBIL Scores Be Hidden?
No. All banks and lending institutions access your CIBIL report through online systems. If you wish to default to one, all of them will get to know it right away. The only thing that you can do is to bring down your score by repaying dues on time and keeping a clean history.
- Frequent Causes of a Bad CIBIL Score
- Missing EMI or credit card payments
- Exceeding credit utilization (using too high of your credit limit)
- Applying for several loans in a short period (causes hard inquiries)
- Default or settlement on loans