A good CIBIL score can pave the way for easy and fast credit, whether you need funds for urgent expenses or to meet your life’s goals. While your CIBIL score isn’t the only aspect of your application or profile that is assessed by lenders, it is certainly an important one. While the score impacts all credit facilities, a higher score is more crucial for unsecured loans, as the lender has no security to depend on in case you default. When it comes to getting an instant personal loan, CIBIL score
requirements vary from lender to lender; however, the norm is that if you have a score of 750 or more, you are positioned as a reliable borrower with a low risk of defaulting during repayment.
Does this mean that there is no option of getting a loan for CIBIL defaulters? While this is a common question, keep in mind that there is no such thing as a CIBIL defaulter. The correct term for those who have a low CIBIL score due to non-payment of EMIs is ‘loan defaulter’, and there is a civil action taken in such cases. While you can also get a loan with a low CIBIL score, you may have to do so by applying with a co-applicant, opting for a secured loan, or submitting financial proof of your repayment ability.
Read on to know more about how a high CIBIL score increases your eligibility for a personal loan.
What is CIBIL score and what components affect it?
Your CIBIL score is a 3-digit number between 300 and 900 that indicates your creditworthiness. This score is assigned by an algorithm used by TransUnion CIBIL
, which is the credit bureau that assigns the CIBIL score. The score is based on your credit report, which contains information that lenders send to CIBIL about your various credit dealings, be it with credit cards, home loans, business loans, car loans, gold loans, personal loans, or others.
A high CIBIL score is generally considered to be 750 and above while a low score is 600 and below. Depending on the lender you choose to apply for a loan from, these thresholds may vary slightly. When you apply for a loan, CIBIL score checks are done by the lender to predict the risk of lending to you. A high score allows you to get a high-value sanction quickly at pocket-friendly interest rates and vice versa. It may also allow you to choose a longer repayment tenor, which lowers your EMIs and helps you to repay hassle-free.
The components that affect your CIBIL score include your repayment behaviour, your experience with a mix of credit, your credit utilisation behaviour and how often you have applied to or enquired about credit.
What does a high CIBIL score signify?
A high CIBIL score means that you have maintained a track record of timely repayment, have experience with various types of credit facilities, are financially responsible and have a modest or fair amount of current debt. All in all, a high score portrays you in a good light as a potential borrower with a low risk of default. This helps increase your eligibility for a personal loan, as lenders are assured that you are fiscally dependable.
What kind of credit behaviour results in a high score?
To boost your score and inculcate the right financial habits, take a look at 7 moves that result in a high CIBIL score.
- Paying EMIs and credit card bills on time
- Applying for new credit circumspectly and not all at once or not all the time
- Building credit history with different types of loans and credit cards (unsecured and secured)
- Being cautious about keeping your credit utilisation ratio low (such as by not using up your entire credit card’s limit too often)
- Not having a huge amount of existing debt (it is best to keep your entire debt to income ratio at 35% or lower)
- Increasing your credit card’s limit when you have a chance to do so
- Borrowing only after budgeting your finances and using the EMI calculator to plan repayment
Given its importance in getting an affordable personal loan, work towards building a good CIBIL score and add one more element to your list of financially healthy habits: check your CIBIL report. Any errors regarding late payment of EMIs or a pending loan account that you have fully repaid can also lower your score. If you notice this, you can raise a dispute online through CIBIL.
Remember before applying for a loan, CIBIL score checks are important for you to conduct on your own as a borrower. Get your CIBIL score instantly and for free via Bajaj Finserv by sharing just a few personal details online.
This not only helps you see your score but also get your CIBIL report. What’s more, by doing this you can also get personalised offers for the Bajaj Finserv Personal Loan which offers you a high loan amount (of up to Rs.25 lakh) on easy terms with disbursal in as little as 24 hours.