A good credit score is of great importance in getting your loan and credit card applications approved. Not many people are aware of this fact and as a result, they apply for a loan without checking their CIBIL score. Only when lenders reject their loan application due to poor CIBIL score, they realize its importance. A credit score is a three-digit number ranging from 300 to 900, which can make and break the chances of your loan application getting approved. It is very important that you check your credit score regularly due to the following:
- Checking credit score helps you know the probability of your loan getting approved.
- In case your score is low, you can work on it and improve it before you apply for a loan.
- Analyzing your credit report regularly helps you keep a check on errors. If you find any errors in your report, you can report these to credit bureaus and get them rectified.
- Based on your credit score you can assess your loan eligibility for different kinds of loan.
Having a good CIBIL score is of prime importance if you are looking for a loan. Good CIBIL score signals your creditworthiness i.e. you have managed all your loans well in past with timely EMI payments. On the other hand, a poor credit score is an indicator of poor repayment history i.e. delayed payments, bounces or defaults etc. If your score is low lenders will be averse in advancing you loan due to higher risk involved. If recently your loan application has been rejected due to poor CIBIL score, then the following tips can help you improve it:
- Pay all your credit card bills and loan EMIs on time. Late payments result in a lower credit score. If your score is low, try to pay all your bills on time. You can set reminders for the same to ensure a timely payment. While doing this, you will observe an immediate positive effect on your CIBIL score.
- Never put forward multiple loan applications as this declines the chances of your loan getting approved. To avoid multiple loan applications, do a market analysis before applying for a loan, select one or two lenders of your choice with whom you wish to apply for a loan and apply for a loan with them only.
- Having a good mix of loan is important for improving your CIBIL score. hence, go for more secured loans and credit cards, as this will have a direct positive effect on your score.
- Loan settlements severely affect your CIBIL score. Never ever opt for a credit card or loan settlement as it will negatively affect your CIBIL score. Instead, you can choose a late payment in case it is necessary. Late payments also affect your credit score but no as much as loan settlements do.
- Keeping credit card utilization low also helps in improving CIBIL score. So, if you are using a credit card try to keep your monthly utilization up to 40% to 50% of the credit limit.
Also Read: Complete Guide To Read Your CIBIL Report
If you are in dire need of funds, you can try applying for a loan from NBFCs as they have flexible eligibility criteria. You can try adding a co-applicant as their good credit score will make up for your poor credit score. In case, you can delay applying for a loan, use the above tips to improve it. Once your score reaches a good level, you can apply for a loan.