One of the major prerequisites for taking a loan is a decent credit score. Banks and financial institutions offer the best loan features at affordable interest rates to customers with a good credit history. Having a good credit score increases the chances of getting faster loan approvals. Read on to know why the credit score is important and how to check CIBIL score before applying for a loan.
What Is CIBIL Score?
The Credit Information Bureau (India) Limited issues a credit score or CIBIL score to an applicant, a three-digit number that is calculated on the basis of their financial history. The CIBIL score is a summary of the applicant’s creditworthiness and ability to pay off the loan amount on time. This number typically ranges from 300 to 900 – 300-549 being very poor, 550-649 being average, 650-749 being good, and 750-900 being excellent. Thus, the higher the score, the better one’s chances of getting low-interest rates and prompt approvals. Usually, a credit score of 750 and above is considered desirable for hassle-free loan sanctions. A low CIBIL score, on the other hand, implies one’s incapability and inconsistency in repaying the loan, thereby attracting high rates of interest.
How Important Is Your CIBIL Score?
The credit or CIBIL score is an important aspect of loan application. It is determined by several factors, such as the applicant’s repayment history, credit history, existing debts and dues, outstanding loan amount, and so on. While the benchmark for loan application and issuance varies for different banks and institutions, the importance of CIBIL score is widely accepted by all lending institutions.
- The credit score helps assess the borrower’s credit status. A customer who is able to manage their finances well will have a better credit score whereas a low CIBIL score signifying poor creditworthiness will refrain the banks from offering such loans. That is why borrowers must attempt to improve low CIBIL score before opting for financial aid.
- A good credit score can fetch the applicant loans at the most competitive rates starting at just 8.65% with minimal documentation as the lender sees them as low-risk borrowers and consistent with the repayments.
Why Is It Important to Check CIBIL Score?
Regularly checking the credit score can help applicants stay updated. In case of a drop in the score due to delay or default in payment, they can track down the CIBIL score low reasons and works towards improving the numbers. Similarly, if your credit score is well above the desired scale, you can review your credit report and look for ways to improve it further. Here are some reasons why one should check CIBIL score frequently –
To Know What Affects the Credit Score
Keeping a track of the credit score helps monitor one’s financial actions and its positive or negative impact on the CIBIL score. Once you know the reasons for low CIBIL score, you can take the necessary steps to avoid further deterioration. For example, you can improve low CIBIL score by clearing your pending bills and EMIs etc.
To Ensure Accuracy of Information
A low CIBIL score can also result from an error or discrepancy in the information provided in the credit report. In such cases, the matter should be reported immediately to the credit bureau and the lender for rectification.
To Get Better Loan and Credit Card Offers
Knowing your CIBIL score can help you find better loan offers in the market. Many lenders offer pre-approved, customized loans depending on the high score. Additionally, a score above 750 can get you extra credit on better terms, thus providing you with the option of negotiating with the lender before taking a loan.
Tips to Improve Low CIBIL Score
Even if your credit score is low due to multiple reasons, you can certainly get it back on track by following a few smart tips, such as the following –
- Pay your dues without fail on time
- Keep your credit utilization ratio below 30%
- Maintain a healthy mix of credit (including secured and unsecured loans)
- Monitor credit report regularly
- Keep the older accounts open
What Is the Process to Check CIBIL Score Online?
The process to check CIBIL score is easier with the online credit score checker. Applicants can simply follow the steps below to know about the credit score –
Step 1: Select a lender and visit their website
Step 2: Access the ‘CIBIL Score Checker’
Step 3: Enter the required details in the relevant fields –
- Full Name
- Date of Birth
- Permanent Account Number (PAN)
- Email Address
- Mobile Number
- PIN Code
Step 4: Enter the One-Time Password (OTP) sent to the registered mobile number
Step 5: Check the box to provide the lender authorization for receiving your credit information from the bureau
Step 6: Hit the ‘Check CIBIL Score’ button
Step 7: View the credit score on the screen
The online presence of various banks and financial institutions has made the process to check CIBIL score easier and more convenient than before.
The credit score serves as the first impression of the borrower in the eyes of the lender. The greater the score, the better the chances of the loan application being reviewed and the amount sanctioned. While a good credit score, preferably over 750, ensures cheaper interest rates and several other benefits, a low CIBIL score demands regular payment schedules and zero defaults. Check CIBIL score frequently and assess the credit reports to know where you stand with the help of the online tool on the portal. Boost the low score by being consistent with credit card payments, debts, and loan EMIs. Most importantly, get in touch with a reliable lender who can walk you through the process with minimal paperwork and hassles.