The Importance of CIBIL Score for Meeting Financial Objectives

Given below are the reasons why your CIBIL score is important:

1. 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.
2. Creditworthiness: Your creditworthiness is decided by your CIBIL score. The higher your CIBIL score, the more your creditworthiness.
3. 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.
4. 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.
5. 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:

1. 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.
2. 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.
3. 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.
4. Reduce credit inquiries: If you make too many inquiries for loans then your CIBIL score may drop significantly.
5. 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.
6. Choose longer tenure: Choose longer repayment tenure as the number of EMIs payable reduces significantly, thus ensuring your credit score remains high.

A good credit score can help you secure lower interest rates on loans and credit cards.

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