Your CIBIL Score is one of the important factors the lender checks on while assessing your personal loan application. The score determines your creditworthiness, helping the lender decide your credit eligibility and repayment behaviour. The score is generated by TranUnion CIBIL based on the data provided by banks and other financial institutions in India. A high score reflects good credit behaviour, whereas, a low score is a determinant of an irresponsible credit behaviour. Majority of lenders in India consider the score of 650 to be an ideal score for personal loan approval.
Here’s a breakdown of different score and what they mean:
Score of 0-1: The score is referred to as NA, meaning that the applicant has less than six months of credit history.
Score of 300-500: This is a poor credit score, exposing the lenders at a very high risk in offering you a personal loan. The score indicates late payment, loan and credit card defaults.
Score of 550-650: This score represents a fairly decent credit behaviour. This score also indicates multiple credit inquiries or late payment of credit card bills or EMIs.
Score of 650-749: This score represents a responsible credit behaviour and makes you eligible to get a personal loan. The interest rate for applicants in this CIBIL Score range is likely to be high in comparison to the ones in the range of 750-900.
Score of 750-900: This score is considered to be an excellent one, determining that you haven’t defaulted on any loan payments. It represents that you have responsible credit behaviour and have no unpaid dues. Lenders are likely to offer you the loan at a low interest rate.
Tips to master the credit card game to be eligible to get a personal loan
Pay EMIs on time: Timely repayment of all your EMIs and credit card bills increases your chances of getting more credit in the future that further helps you improve your credit score.
Avoid making multiple applications: If you think that by making multiple credit card and loan applications will help you increase your score, then you are highly mistaken. It is important to note that making multiple applications can hurt your score and every time you make an application, the lender generates your credit report and this inquiry is recorded by CIBIL. Making multiple applications represents credit hungry behaviour and rejection of the application can decrease your score.
Don’t keep on applying in case of rejection: If a lender has rejected your loan or credit card application, then it is advised that you immediately do not apply with another lender. This is because the information is recorded in your CIBIL Report. If you go and apply with another lender then the low score, rejection of the application by the previous lender can lead to immediate rejection by the existing lender you are applying with.
Clear credit card outstanding: One of the important moves you can make to improve your credit score is that you can clear off the outstanding credit card debt you hold. Clearing credit card dues on time helps you maintain a clear image in front of lenders that further helps you secure instant loans on credit card as well. Also, it is not considered a good idea to hold more than two or three credit cards.
Do not close your credit card: Even if you don’t use a specific credit card anymore, it is advisable not to close the card as doing so can hurt your credit score. Closing an old credit card is like deleting your old credit history that can dent your score.
Do not opt for loan settlements: Many a times, people opt for settling on loans and credit card debts by going to the lender or bank and opting to pay a lower amount than the actual amount due. Though doing this would seem to be the right thing to do in the scenario when you don’t have enough money in hand, doing so can in fact have a negative impact on your score that can lead to rejection of your loan or credit card application in future.
Have a mixed bag of credit: ensure that you maintain a mixed bag of credit portfolio i.e. holding both secured and unsecured loans. Taking too many unsecured loans can have a negative impact on your score. Opting for secured loans like a home loan, car loan can help you increase your score.