What is CIBIL score and how it impacts your loan application?

Published on :   Aug / 19 / 2019

Every month, banks and financial institutions send information about individuals and businesses to the TransUnion CIBIL Limited, commonly known as Credit Bureau. This information helps the Credit Bureau to evaluate your financial situation. They are licensed by the RBI and by Credit Information Companies (Regulation) Act of 2005.

Based on your credit repayment history, the Credit bureau will evaluate you and give a three digital score. It ranges from 300 to 900. This score helps the lending institution to get an idea about your repayment behaviour – the lower side being negative and the higher side being positive. The lender will be more confident about lending to you if your score is above 750. All banks and lending firms check your credit score before accepting your loan application.

CIBIL Commercial Report

This report tells the creditworthiness of a business and its financial health. It is passed on to the banks and other financial lending institutions for loan application evaluation.

Here are the factors that will affect your CIBIL score negatively:

Payment behaviour:

It’s crucial to pay at least the minimum overdue on time every month. If you miss any payment, it will reflect poorly on your credit score and suggest a negative repayment behaviour.

Outstanding balance:

You must never leave the balance outstanding in your credit card. It’s devastating to the credit score, and the recovery takes a long time of consistent payment.

Missing the due dates:

Missing the payment on the due date puts you on the lower side of credit score and gives a negative impact on the CIBIL score.

Advantages of Having a High CIBIL score:

Hassle-free and faster loan approval.

Cheaper interest rate on the loan.

Better credit limit on the credit card.

Waiver on loan processing fee and discount on other charges.

It is always better to use a credit card wisely and responsibly. Because once you fall in the negative side of the CIBIL score, it takes a lot of effort and consistent repayment to improve the credit score. Follow the responsible way of using credit cards and keep your score above 750 to enjoy all the perks.