What is CIBIL Score? Is It Mandatory to Avail Loan?

A lot of people have problems getting approved for a loan at first and one of the reasons can be that the CIBIL score was not up to the mark. The CIBIL TransUnion Score is a 3 digit numeric summary of one’s credit history and it reflects one’s financial history. The better the score, the greater are the chances of getting approved for a loan as it indicates that one has a strong financial background.

The score is crucial and is based on one’s past financial transactions and how one manages their loans and debts. In case of unsecured loans- that is- in loans where no collateral is needed, the banks and other lenders always make it a point to check this score before deciding whether to approve a particular loan application or not.

To know what is a good cibil score for personal loan is very important when willing to take loan. It is very vital collecting data from one’s financial history like loans and credit card payments, whether all the bills have been paid on time and all the lenders have received their dues. The Credit Information Report and the Credit Score are prepared and provided to the bank and based on this they evaluate the borrower and ascertain whether he is a good risk or not to loan out to. A credit bureau is licensed by the RBI and governed by the Credit Information Companies.

Good CIBIL score for personal loan is crucial for a home buyer because it plays a role in determining their maximum personal loan limit and home loan eligibility as well. 750 is considered to be a good score and it not just possible to get a higher loan limit, but also negotiate with the lender to bring down the loan interest rates. If the credit score is low, then the lender might even reject the loan application and one should wait for an adequate time period to improve the score and apply for loan again. The right credit score definitely creates an impression with the lender and so it is advisable not to let one’s score slip below 650. One can use a loan eligibility calculator from the lender’s website and by filling in a few details would be able to see whether they are qualified for the loan or not.

A number of factors can affect the CIBIL score of an individual. Making late payments can go against the borrower and defaulting on your EMIs or the credit card payments is one of the reasons why credit scores might dip. An increase in the current balance of the credit card loan would also affect the score and so it is important to make timely repayments on the card. Higher percentage of the credit card or personal loans, which are also unsecured loans, could adversely impact the score. Having a balance of both secured and unsecured loan kind of has a more positive impact on the score.

Those who have recently acquired multiple loans or have acquired new credit cards will find that their loan application is inspected with caution because the debt burden has increased and lenders might be apprehensive about giving you a fresh loan. Hence, it is imperative that one maintains their CIBIL score.

However, loan for low CIBIL score are also available from certain lenders but the borrower almost always has to pay a high interest rate on them. However, by paying off these loans consistently, the borrower will be again able to bring up the credit score quite a bit which can prove to be beneficial for him in the long run.