If you want to apply for a loan or a credit card then you must maintain a good CIBIL score. If your CIBIL score is high then it becomes easy for the lenders to approve your application for a loan or a credit card and help you meet your immediate financial needs.
Your CIBIL score allows the banks and lenders to know your financial history before approving or rejecting your loan or credit card application. Therefore, it is important you pay all your bills and outstanding EMIs on time so that you can maintain a good CIBIL score. You must maintain a CIBIL score of 700 and above.
Importance of CIBIL score
Given below are the reasons why your CIBIL score is important:
- Minimum Credit Score: Your CIBIL score helps in preparing the financial data which allows banks and lenders to decide whether to approve your loan application or not.
- Creditworthiness: Your creditworthiness is decided by your CIBIL score. The higher your CIBIL score, the more your creditworthiness.
- Application approval: If your CIBIL score is high, then it becomes easy for the bank to approve your application for loans since they will be convinced that you will be able to repay them on time.
- Interest rate: Having a high CIBIL score can be beneficial since banks may reward you with a low-interest rate on your loan amount. Hence, having a good CIBIL score becomes important.
- Loan amount: The loan amount you will be able to avail of yourself will depend on your CIBIL score. If your CIBIL score is low then the bank may not feel confident to allow you to apply for a higher loan amount. Hence, maintain a good CIBIL score if you wish to avail yourself of a higher loan amount.
How to improve your credit score
Given below are some of the ways through which you can improve your credit score:
- Timely payment of bills: If you have any outstanding EMIs or bills, then ensure you repay them in full on time. Repaying your EMIs on time ensures your credit score remains high.
- Credit card utilisation: If you own multiple credit cards, then ensure the credit utilisation ratio is below 30%. For example, if your total credit limit is Rs.5 lakh, then do not spend more than Rs.1.5 lakh on your card. Having a high credit utilisation ratio gives the impression you are too dependent on credit money which in turn can negatively impact your credit score.
- Don’t avail too many loans: If you have an existing loan and wish to avail of another loan, make sure to clear your previous loan in full. Having too many loans can bring down your credit score.
- Reduce credit inquiries: If you make too many inquiries for loans then your CIBIL score may drop significantly.
- Check credit report: It is important you check your CIBIL score from time to time. Sometimes, there can be errors in your report which may negatively impact your score. In case you find errors, you can get them fixed.
- Choose longer tenure: Choose longer repayment tenure as the number of EMIs payable reduces significantly, thus ensuring your credit score remains high.
FAQs on Importance of CIBIL Score For Meeting Financial Objectives
- Can I improve my CIBIL score if it is low?
- Will my CIBIL score if I delay the payment of EMIs?
- What is the maximum CIBIL score I can get?
- What is the minimum CIBIL score I can get?
- Will my CIBIL score be affected if I stand as a guarantor?
- My CIBIL is 550, can I get a loan?
- I have an inactive bank account. Will my CIBIL score be affected?
- I missed one EMI payment. Will my CIBIL score be affected?
Yes, you can always improve your CIBIL score if it is low provided you inculcate a certain financial discipline.
Yes, your CIBIL score will drop if you delay the payment of EMIs.
You can get a maximum of 900 CIBIL score.
You can get a minimum of 300 CIBIL score.
If you stand as a guarantor for someone and the person doesn’t repay the loan on time, then your CIBIL score can drop.
If your CIBIL score is 550 then it will become difficult for you to get a loan.
No, your CIBIL score will not be affected if you have an inactive bank account.
Yes, even one missed EMI payment will impact your CIBIL score negatively.
Read More on CIBIL
- What next in CIBIL
- Company Credit Report(CCR)
- How important is your CIBIL Score/Report?
- How to resolve Credit Report Errors
- How Important is Credit Information for a New Borrower
- CIBIL Grievance and Redressal process
- Loan Approval Process On CIBIL Scores
TransUnion CIBIL is one of the leading credit information companies in India. The company maintains one of the largest collections of consumer credit information in the world. CIBIL Score plays a key role in the lives of consumers. Banks and other lenders check the CIBIL Score of the applicants before approving their loan or credit card application. Consumers can visit the official website of CIBIL to check their CIBIL Score and Report.