4 Things You Can Do With a Great CIBIL Score in India

In India, CIBIL score or credit rating plays a significant role when it comes to availing financing. Whether you seek funds for overseas education, host a grand wedding, consolidate debts or make a down payment, lending institutions will check your credit score before they approve a personal loan to you. Not only for loans, but a healthy credit score is also beneficial in multiple other ways.

However, before that, what is a CIBIL score?

CIBIL rating is the summarisation of your financial history represented as a 3-digit number. Calculated on a scale of 300 to 900, a minimum of 700 is necessary to qualify for attractive features and benefits. Financial institutions consider your credit profile to be stronger if the score is close to 900.

Various factors are considered to calculate CIBIL score of an individual including credit utilization, credit history, credit mix, etc. Once you possess a healthy CIBIL rating, here are a few essential things you can do.

4 things a great credit score allows you to do:

1. Negotiate to lower interest rates

A healthy CIBIL score in India permits you to negotiate and seek lower interest rates from your lending institution. Since lenders consider credit rating to decide on the interest rate, a higher score signifies you’re creditworthy. Hence, you can enjoy the best rates, pay off your loan faster and save more for other essential expenses. Now check your free CIBIL score online by a few simple steps.

Not only interest rates, but you can also negotiate for the best advantages, features and offers on a personal loan.

2. Apply for a higher loan amount

A healthy score above 750 allows you to apply for a higher loan amount. As lenders are assured of your creditworthiness, they readily approve your application without much hassle. Popular and trusted NBFCs offer personal loans up to Rs. 25 Lakh with no end-use restrictions. You can avail the same to cover diverse expenses, from financing an overseas trip to medical emergencies.

3. Enjoy fast approval of your loan application

At times, the personal loan application process can get lengthy and tedious if applicants fail to fulfil the necessary requirements. While your income, repayment capabilities, etc. are equally important, a poor credit score alone can lead to the application’s rejection straightway. Conversely, financial institutions take substantially lesser time for loan applicants with a higher credit score.

NBFCs usually approve personal loans within 24 hours of application. You can also avail pre-approved offers for instant approval.

4. Receive a waiver from processing charges

Some financial institutions may also waive off processing charges if you have an excellent credit score. However, remember that this depends on the institution’s terms and conditions. If not a waiver, you can certainly enjoy nominal processing fees with reputed lenders.

So, ensure to check your rating frequently and enjoy all these benefits of a good CIBIL score. You can also improve your credit score in case it is low.

Ways to improve your CIBIL score

a. Clear all your dues in time

Repayment behaviour of an individual is a significant factor, making up 1/3rd of his/her credit score. Many people delay their bill payments or skip loan repayments within the due date. However, a single default can negatively affect the credit score. So, ensure to make your loan and credit card payments before the deadline.

If you tend to forget such payments, set a reminder or the auto-debit feature.

b. Limit your credit utilization within 30 – 50%

If you are using a credit card, ensure not to use more than 50% of its limit.

For example – Say, your credit card limit is Rs. 1,00,000. Try to restrict your utilisation within Rs. 50,000; or else, besides a drop in credit score, lenders may also consider you as a credit hungry borrower and deny access to financial products in the future.

c. Avoid applying for multiple loans at a time

Every loan application calls for an enquiry by the lender in your CIBIL database. Too many inquiries from multiple applications can adversely affect your credit score and report.

d. Maintain a good credit mix

It’s always advantageous to maintain a healthy credit mix of secured and unsecured loans to help your CIBIL rating.

e. Check your credit report periodically

Make it a habit to review your credit report frequently so that any discrepancy can be resolved in time. This also builds your credibility, thereby, increasing your credit score.

Above all, be responsible with your finances to improve your CIBIL score and avail exclusive benefits on a personal loan. Do check your eligibility for a loan with personal loan eligibility calculator beforehand to avoid rejection.

Arwind Sharma is a financial advisor with an experience of more than 7 years. He has worked for topmost financial firms in India and has been a visiting faculty at many reputed institutes in India.