Home Finance CIBIL Score and its Importance

CIBIL Score and its Importance

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Everyone desires a better life and sets objectives for themselves. Perhaps the consumer is unable to meet his objective due to a shortage of cash. As a result, we require financial support in order to accomplish our objectives and demands. So, how does one go about finding out what their online CIBIL Score is? In addition, how does the lender use it while providing loans?

Calculation of CIBIL Score

A credit score is calculated using the four factors listed below:

Payment History: Any payment delay or default has an impact on the consumer’s CIBIL Report. As a result, making timely payments is advantageous.

Loans, both secured and unsecured a balanced diet: A well-balanced mix of secured and unsecured loans will assist you in improving your credit score.

Number of inquiries: Fewer loan queries result in a higher credit score. It reflects the creditworthiness of a customer.

Credit Use:– Excessive credit use has a detrimental impact on a consumer’s credit score, which eventually reflects higher debt over time.

Improving CIBIL Score

A consumer’s credit score is determined by their credit history and past payments. This has an impact on future financing availability. Quick credit score improvement tips:

Pay your bills on time: Late payments or defaults have a negative impact. Low credit balance: Using credit less frequently has a favourable impact on it. Credit mix balance of secured and unsecured loans:- A large number of unsecured loans have a negative impact on the credit score. Apply for new credit: This demonstrates that you are not constantly seeking excessive credit. Review your CIBIL Score on a regular basis: A regular check of your credit score allows you to stay up to date on your credit history and defaults. 

Types of Loans

There are a variety of loans that you can get if you have a strong CIBIL score. Before applying for credit, consumers should be aware of the many types of loans available. There are two kinds of loans: secured loans and unsecured loans.

Secured loans: These loans are backed by collateral. Home loans, automobile loans, and commercial loans are all included.

Unsecured loans: These loans do not require any type of collateral. Personal loans, credit cards, and student loans are all covered.

Unsecured Loans
Type of Loan CIBIL Score Required
Credit Cards Above 650
Education Loan Above 700
Personal Loan Above 700

 

Secured Loans
Type of Loan CIBIL Score Required
Loan Against Property Above 650
Gold Loan Not Required
Business Loan Above 700
Car Loan  Above 700

Common Habits to Maintain a High CIBIL Score

Here are some of the methods that you can use to either raise your CIBIL score and improve your creditworthiness or maintain your CIBIL score if you already have a high score:.

Keep a consistent EMI payment plan

Make your EMI and credit card payments as consistent and on schedule as possible. This indicates solid financial management as well as respectable behaviour.

Ensure that you have a good mix of secured and unsecured loans

Maintaining a balanced mix of secured and unsecured loans might assist you in improving the borrower’s reputation. People who use unsecured loans frequently attract unwanted attention.

Keep your credit-to-debt ratio low

It is strongly advised that you have a low debt-to-income ratio. Though loan payments will lessen the amount due over time, it is equally important to monitor your credit card utilisation. Exercising your credit card limit too frequently may have a negative impact on your reputation.

Keep your cool when filling out a new credit application

When applying for new credit, avoid going overboard. A little loan amount shows that you understand your ability to repay and that you will repay the loan on time. This method will assist you in knowing how to improve your CIBIL score.

Examine your credit history

Checking your credit history on a regular basis may be useful in the long term. Examine your credit report to see if it accurately represents your current financial situation.

 

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