Loan: Taking a loan to complete an important task is considered a well-thought-out decision. However, your credit score can create some ‘problems’ for your future loans.
If you are not getting loan due to bad CIBIL score, then do planning like this, the problem will go away
CIBIL Score : If you are planning to take a loan and your CIBIL score is bad then you do not need to worry. Because only after having a bad CIBIL score, you can easily take a loan. For this you have to take care of some important things. Taking a loan to complete an important task is considered a wise decision. although your credit score This can create some ‘problems’ for your future loans.
Credit Information Bureau (India) Limited (CIBIL) Score is a 3 digit numerical summary of your credit history. This is achieved using the details found in the ‘Account’ and ‘Enquiry’ sections of your CIBIL report. The report is obtained including (but not limited to) your loan account or credit card, and their payment status, as well as the past due days. These details can be extracted with the help of PAN number. The score reflects your credit worthiness based on your borrowing and repayment history shared by lenders (such as banks).
Know when the CIBIL score is good
Let us tell you that your CIBIL score ranges between 300 to 900 and the higher your score, the higher are your chances of loan approval. The closer your score is to 900, the better your credit rating. Credit Information Bureau (India) Limited was incorporated in 2000 and started its operations in April 2004.
Following the enactment of the Credit Information Companies (Regulation) Act (CICRA) in 2005, three other Credit Information Companies (CICs) were also established. They are Experian, Equifax and Highmark. However, the most popular credit score in India is the CIBIL score.
Why is CIBIL score important?
Your CIBIL score is an important factor that lenders look at while evaluating a loan application. CIBIL score acts as the first impression for the lender, higher the score, better are the chances of your loan being reviewed and approved. However, you must note that the lending decision entirely rests with the lenders and CIBIL in no way decides whether the loan/credit card should be approved or not.
This is how the math of CIBIL score is done
The most important elements of the score’s calculation center around the loan payment behavior of the individual. Your payment history, your credit exposure, credit type and tenure are primarily taken into account. The CIBIL TransUnion Score is calculated based on the information provided in ‘Accounts’; and the ‘Enquiry’ section of your CIBIL report. The score is calculated on the basis of the following factors:
- Credit Utilization: How much credit is being utilized by the borrower?
- Defaulter: Have you missed any installments? How many accounts are past due and for how many days?
- Properties: How old is this consumer’s credit line? what type of credit? Does the consumer have a good credit mix or balance or is it all credit cards?
- Investment and Insurance: What is a unit-linked insurance plan that offers dual benefits?
These factors affect CIBIL score
- Payment History: Late payments or defaulting on EMIs have a negative impact on your score.
- Multiple Inquiry: Too many loan inquiries can have a negative impact on your score as it indicates that your loan burden may increase in future.
- High Credit Utilization: A high credit utilization limit indicates an increasing debt burden over time and can negatively impact your score.
improve cibil score like this
- By adopting a disciplined financial cycle, you can improve your score, pay your credit card bills on time, do not miss loan EMIs, never default on loans, use credit wisely.
- Timely payment of loan EMIs is considered to be one of the important habits that help in maintaining a proper credit history and a good credit score.
- Monitor your CIBIL score report regularly. This will act as a warning to any possible inaccuracy. In case you find any discrepancy/mismatch, you can report the same on CIBIL website or request the lender to report the rectification to CIBIL.