CIBIL score plays a key role when it comes to sanctioning of a loan to borrowers. Having a low CIBIL credit score can make a loan costlier and also makes it difficult to get a loan. CIBIL score shows a person’s credit discipline and his or her loan history. Here’s what is this and how you can improve your CIBIL score:
How to Improve CIBIL Score And Maintain It?
Keeping a good credit score is important to get a loan or credit card from any bank. Here are some of the important tips:
1) The credit utilisation ratio should be limited to 30 per cent for a good CIBIL score. It is advised to get a credit card with a higher top limit, if you are struggling to stay within the existing limit of the card.
2) Repayment of loans or credit card dues has a very big impact on your CIBIL score. So, any loan or credit card dues must be repaid within time to maintain a good CIBIL score.
3) It is better to diversify the loan portfolio with a good mixture of both secured and unsecured debt in order to get a high CIBIL score. A credit card is an unsecured debt, whereas a home or vehicle loan is a secured debt.
What is CIBIL Score?
CIBIL Score is a three-digit number, which ranges between 300 and 900. The higher the score, the better it is. Generally, a score above 750 is considered good where the chances of loan approval become higher. The report containing this score is called CIBIL Report.
The CIBIL report allows the bank to have a look at a person’s credit history, including whether the person has ever defaulted on any of his/ her previous debts. It also shows how many loans has the person taken so far, including the amount and the duration of the previous credits. It helps banks mitigate risks of defaults and hence reduces losses.
CIBIL Score and Loan Rate
Apart from easy approval of the loans, a good CIBIL score also helps the borrowers get cheaper loans. For instance, on home loans, State Bank of India (SBI) offers loan rates based on the credit score of the borrower. It offers regular home loan at 9.15 per cent for those having a CIBIL score above 750, 9.35 per cent to those having a score of 700-749, 9.45 per cent to those with 650-699 CIBIL score. Those having a CIBIL score of 550-649 can get the home loan at 9.65 per cent.
(The article was originally published on May 30, 2023)
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