When you apply for a personal loan from a bank or a financial institution, the prospect of your loan application depends on your credit profile and CIBIL score. Simply said, the lender looks up your credit history and credit score to gauge your creditworthiness as a borrower. If you fail to meet the required criterion, your loan application is likely to get rejected.
What is a CIBIL Score?
A CIBIL score reflects an individual’s credit profile. It is a three-digit numeric summary of a consumer’s credit history. A CIBIL score is one of the most important factors taken into consideration by the lender when granting a loan. Having a good credit score reflects a healthy credit history and increases one’s creditworthiness for a loan.
How to Calculate CIBIL Score?
Your CIBIL score is based on your past financial behaviour, such as your borrowing and repayment history, which lenders periodically update on the CIBIL database. Apart from your payment history, factors like credit mix, number of loan accounts, and credit utilization have an impact on your CIBIL score.
What is a Good CIBIL Score?
A CIBIL score ranges from 300 to 900. To avail a personal loan using personal loan app, you need to have a credit score ranging between 720 and 750. A CIBIL score over 750 increases your chances of availing a loan at affordable rates. It is crucial to have a good score to be eligible for negotiating your loan terms.
Tips to Maintain a Good Credit Profile
- Pay Your Bills on Time: Making timely payments towards your bills and debts will help improve your credit score. On the other hand, defaulting on payments affects your credit score negatively.
- Keep a Low Credit Utilization Ratio: You need to keep a low credit utilization ratio, i.e. 30% or less of your approved limit. Doing this allows the lender to view you as someone who manages their credit well, ultimately translating into a positive influence on your credit profile.
- Maintain a Healthy Credit Mix: Having a healthy balance of secured and unsecured loans will reflect your ability to manage your repayments. A healthy mix of credit also works in favour of building your credit profile and helps improve your credit score.
How Long Does it Take to Rebuild Your Score?
To improve your score, you must first start working on negative aspects, such as delayed payments, bankruptcy, pending bills, or too many credit inquiries that are reflected in your report. Improving your credit score requires time and patience, especially if it’s too bad, but with good credit and financial discipline, you can build it back up in no time.
How to Check Your CIBIL Score Online?
Numerous financial service providers allow you to check your CIBIL score and CIBIL report online. Moreover, you’re also given a free CIBIL report check once a year. If you have already accessed your free CIBIL score and report and wish to monitor your credit history again, you must pay a fee to get the details online. Moreover, it’s a good habit to monitor your credit score so that you are well-aware of your score analysis, credit history, and trends.