Personal Loans have become a popular credit facility due to their collateral-free nature and unrestricted usage. However, lenders are still cautious about the potential risks involved in lending money without security. To alleviate their concerns, it is essential to maintain a good CIBIL score.
Your CIBIL score is a three-digit number between 300 and 900, calculated based on factors such as your credit history, current liabilities, credit exposure, and debt history. A high CIBIL score demonstrates responsible credit management, which can increase your chances of approval for a Personal Loan. Although it is possible to get a Personal Loan with a low CIBIL score, lenders often prefer applicants with a good and high score.
Maintaining a good CIBIL score is crucial to secure a Personal Loan easily and quickly. A high score not only improves your chances of getting approved, but it can also help you negotiate better terms, including lower interest rates and longer repayment periods. Thus, it is essential to check your CIBIL score regularly and take the necessary steps to improve it if needed.
Benefits of CIBIL score
Apart from creditworthiness, the CIBIL score provides some additional benefits as well –
Secure better interest rate
A good CIBIL score enhances your chances of getting a loan at a low-interest rate. Some lenders may waive additional charges also if you can show a high credit score.
Get a higher loan amount
For someone having a low CIBIL score, it can be a bit difficult to get approval for a considerable amount of Personal Loans. Whereas, with a good score, reaching a high amount of loan can be very easy.
Fast approval of a loan
Since a higher CIBIL score means you are a responsible borrower, it encourages lenders to approve your loan application without much deliberation. Now that you know why this CIBIL score is so talked about in the finance industry, you must consider what factors affect this score and how you can improve your score.
How to improve CIBIL score?
Here are some tips on improving your CIBIL score –
Pay the dues on time
You should always keep in mind to pay back your loans on time. If you default, it can severely affect your CIBIL score for personal loans, lenders rely on the credit history of the borrower. If your credit history shows you had defaulted multiple times or had paid back much later, it will surely create problems for you. The lender will need to find you more trustworthy.
Maintain a low credit utilisation ratio
The credit utilisation ratio shows the rate of your used credit with your monthly income. This ratio highlights how well you manage your overall credits. Ideally, this ratio should be at most 30%, as it suggests you rely too much on credit to manage your finances. The best option is to make essential transactions only, so it shows that you use your credit wisely.
Not closing old credit cards
In case you have any old credit cards, it is better not to close that. Your old card has a long credit history, and closing it will impact the CIBIL score. Try not to do that to ensure you maintain this score.
Keep on checking for errors
After you get your CIBIL report, you should thoroughly look and see if all the details are correct. In case of any doubts, cross-check your data and contact the credit rating agency as early as possible and get them rectified. Doing it will better your CIBIL score.
Never go for multiple applications
Whenever you apply for a new loan, the financier will raise a query with the credit rating agencies like CIBIL. This is called a hard query, and it adversely affects the CIBIL score. Try and stay away from applying for multiple loans at once.
Try to maintain a mix of credit
For a good credit score, blending both types of credit – secured and unsecured, short- and long-term loans is advisable. This will improve your CIBIL score.
Having a decent CIBIL score will help you get a personal loan on aadhar card without any hassle. But you should also focus on meeting the eligibility criteria and submit other documents to ease the process further.
A good CIBIL score is essential to meet your financial goals, and therefore, you should always look for ways to improve it. Hopefully, this write-up has helped you to get a better idea of the importance of this score and how to improve it.