Your CIBIL score or credit score plays a crucial role in increasing your loan eligibility. It determines your financial capacity and creditworthiness. The CIBIL score is a numeric value that ranges from 300 to 900, and the higher your CIBIL score, the better will be the chances of your loan approval. Financial institutions evaluate your CIBIL score before granting your loan amount. If you have good credit, lenders will consider you as a low-risk applicant and sanction the loan amount with ease. Therefore, you must work towards improving your CIBIL score before applying for a loan. Below, we are going to have a look at various benefits of having a high CIBIL score and also discuss some tips and tricks through which you can improve your CIBIL score significantly over a while.
Benefits of High CIBIL score
Improves chances of loan approval
- If you have a CIBIL score of 750 or above, then the chances of your loan approval are very high. Lenders will easily grant you the loan if you have such a high score. Before applying for a loan, you must check CIBIL score to get a fair idea as to whether your loan application will be accepted or not. If you have a CIBIL score below 600, lenders would usually hesitate in approving your loan application. Therefore, try to work towards boosting your CIBIL score before applying for a loan.
- You can check your CIBIL score by visiting the official CIBIL website and filling an online application form. You may have to pay a nominal fee for the same. You must understand how to check CIBIL score as it is one of the major deciding factors when it comes to loan application approval.
Higher loan amount and competitive interest rate
A high CIBIL score will not only enhance the chances of your loan approval but also make you eligible for a higher loan amount at a competitive interest rate. If you have a high CIBIL score, you can negotiate with the lender to get the loan at a more attractive rate. Also, with a good CIBIL score, you would be able to avail a loan with more favourable terms and conditions.
Loans with longer tenure
You can avail a loan with a longer tenure if you have a good credit score. Opting for a long term loan will lower your monthly instalments. This will help you reduce your repayment burden, thereby allowing you to make timely repayment of the loan amount.
Discount on loan processing fees and other charges
When you apply for a loan, you have to bear processing fees. Additionally, you may have to take care of other charges such as prepayment penalties, late payment charges, etc. Having a high credit score can help you get a discount on such charges, thereby reducing the overall cost of borrowing.
Credit cards with a higher limit, better benefits and rewards
- With a high credit score, you can avail a credit card with higher limit. However, make sure that you do not over-utilize your credit card and repay the credit card bills on time. If you fail to do so, your credit score may be affected negatively in the long run.
- Apart from a high credit limit, you would also be eligible for various benefits and rewards on your credit card if you have a high credit score.
Now that you have a fair understanding of various benefits of having a high CIBIL score, let’s have a brief look at some of the ways through which you can improve your credit score gradually.
Ways to improve your CIBIL score
Make timely repayment
If you have any existing loan, ensure that you make its timely repayment. Do not delay or miss out on paying even a single EMI as this could hamper your CIBIL score significantly.
Clear outstanding dues
To have a high credit score, you must clear all your outstanding dues at the earliest. Also, make sure that you inform the lender as well as the credit bureau after clearing your pending dues. You must check your credit report to ensure that the changes have been made to the same once all the outstanding dues are cleared.
Minimize your credit utilization ratio
Your credit utilization ratio is the ratio of the amount of credit you use to that total credit limit. The lower your credit utilization ratio, the better it is for your credit score. To minimize your credit utilization ratio, you should avoid using credit cards excessively and improve your spending habits. Another way to minimize the credit utilization ratio is to increase your overall credit limit while keeping the usage of credit cards low.
Make the most of the above-mentioned tips and start working towards improving your CIBIL score, today.