What is a Cibil Score?

Credit scores are a measure of a person`s prudent credit behavior. Lenders almost usually favor borrowers with high credit scores. Today, the majority of lenders utilize a credit score to assess a person`s creditworthiness. In addition to determining a potential borrower`s being eligible, a person`s credit score also affects how much of a loan they qualify for and what their interest rate would be.

Credit bureaus like Equifax, CIBIL, Experian, CRIF High Mark, etc. produce credit scores in India. Each credit agency uses a different formula to determine credit scores, so the results may change significantly.

Cibil Score Range

CIBIL scores vary from 300 to 900, with a maximum creditworthiness score of 900. The optimal CIBIL score for your credit report is 750 or higher. You`ll be able to apply for credit cards and personal loans more easily.

You will have a difficult time getting a loan from a bank or an NBFC if your CIBIL score is under 750. If your score is near 750, you might be granted a loan at a higher interest rate, or if it is considerably lower, your application might be completely turned down. Therefore, maintaining a CIBIL score of 750 or more is crucial.

Benefits of maintaining a good Cibil Score

A high credit score offers many advantages. Therefore, in order to choose the loan that fits best to his specifications and needs, a prospective borrower must be conscious of the benefits prior to seeking a loan.

Higher Chances of Approval: Having a good credit score implies responsible credit behavior, a history of on-time payments, and a decreased risk of default for the lender, all of which boost your chances of getting a loan or a credit card.

Lower Interest Rates: Low borrowing rates are the key advantage of maintaining a strong CIBIL score. Interest is assessed in accordance with the likelihood of default. Sound creditworthiness and timely and regular repayment of prior debts are determined by a high credit score. Because there is little chance of default, the benefit is reflected in comparably low-interest rates.

Enhanced Availability of Pre-approved Loans: Having a good credit score can enhance the likelihood of receiving pre-approved loans and credit card offers.  These offers might provide you with credit more quickly because they normally require fewer documents and have faster approval processes.

Simplified Access to Premium Credit Cards: When evaluating credit card applications, lenders frequently consider the applicant`s credit score. As a result, individuals with good credit scores are more likely to be granted access to premium credit cards that offer attractive perks such as reward points, cashback, exclusive services, and more.

Potential Approval for Extended Tenure Loans: Loans with a longer term may be approved, but there is typically more risk involved for the lender. Nonetheless, a good credit score can increase your chances of obtaining a loan with an extended repayment period compared to individuals with lower scores. Opting for a longer tenure leads to smaller Equated Monthly Installments (EMIs), reducing your monthly credit burden and potentially aiding in better management of your monthly expenses.

How can you improve your CIBIL score?

There are eight strategies to improve your CIBIL score:

1. Make on-time payments on your utility bills, credit card bills, and EMIs.

2. Make sure your credit use is less than 30%.

3. Avoid applying for many credit cards at the same time.

4. Diversify your loans or credit, i.e., use a combination of credit cards and personal loans if you require additional dollars.

5. Attempt to raise your credit limit.

6. Include in your credit report all records of good loan practices.

7. Through your financial practices, you can reduce risk and boost dependability.

8. Keep the number of hard queries on your credit report to a minimum.

Conclusion

To summarize, maintaining a consistently high credit score is important. A good credit score increases the likelihood of being approved for pre-qualified loans, obtaining credit with low-interest rates, and enjoying favorable terms from lenders.