Improving CIBIL Score for Personal Loans

CIBIL Score

A CIBIL Score is a score ranging from 100-900, which is assessed by every financial institution, NBFCs or bank before approving any loan. A high CIBIL Score depicts a borrowers creditworthiness, and a poor CIBIL score represents the previous or current defaults. A score of 700 is highly favorable for getting a quick disbursal of a loan.
A credit bureau computes the CIBIL Score of a potential individual depending on one's credit history. A credit bureau is highly regarded for its accuracy and transparency while evaluating this Score. A number of enquiries made to analyze this Score are also mentioned in the report.
A CIBIL Score is one of the eligibility parameters in Personal loan eligibility.

Importance of CIBIL Score

A CIBIL score serves as a report card for your financial honesty. It is a signal that notifies a lender either 'yes, you may grant the loan' or 'no, he/she does not appear to be able to repay on time.'

1. For quick Loan Approval- While applying to loans that don't have any security involved is assessed with a CIBIL Score. A Credit track record helps in reviewing one's potential and past defaults while sanctioning an unsecured loan. The overall process becomes complicated with a Credit history containing defaults and having a score less than 350. 

2. Secured and Unsecured Loans- CIBIL Score is mandatory for secured loans and unsecured loans as one has a mortgage involved whereas the other doesn't. This Score helps in evaluating the risk of the loan which the creditor poses while lending. A good credit profile signifies the borrower's repayment ability to complete the debt obligation in the given term. 

3. Negotiating the rate of interest- The interest rate varies from banks to banks and mainly depends on the applicant's profile at loan approval. Having a good CIBIL Score can help you negotiate the rate of interest and acquire a great deal. 

4. Less costly Insurance Premium- Insurance is vital while availing of any loans. It is a crucial financial instrument that covers your debt and dues when you are unable to pay them or deceased, depending on the insurance's policy. Depending on the borrower's credibility, repayment history and defaults, a lower premium can be availed.

CIBIL Score- Effective ways for improving It

A poor credit rating can be raised by performing the following things. It is important to know that it will take at least six months to notice a significant difference in your credit score and 'improvements' on your credit report.

a. Obtain your most recent credit report- This will help you estimate your current report and assist you in managing your finances and minimizing errors. You can evaluate the reasons behind your low credit score and the reasons behind it. 

b. Never postpone payments- You can't give excuses for late repayments as the bank charges a surplus amount on every late repayment. So don't slip into the habit of making late repayments of your debt, as it can lower your CIBIL Score and charge a hefty amount as a penalty.  

c. Maintain a varied credit portfolio- A portfolio will help the creditor/lender in estimating your creditworthiness and your debt obligation. d. Avoid having unused credit cards. It is no use in keeping several credit cards when you don't use or require them as you will spend unnecessary annual charges over it. 

e. Debt management that is savvy- If you manage your debt consolidation smartly, you won't be facing any burden while making repayments. A credit card can also imply revolving credit which will eventually have a negative impact. Completing the debt with a personal loan is an effective way for meeting your obligations where less interest rates will be incurred. 

f. Don't opt for longer term- A loan term can have a direct impact because of the incurring interest on the loan amount. If you avail a loan of 3 years and mid-way extended it, then it will have surplus interest charges imposed on it with extension charges.

Thus, to obtain a Yes bank personal loan, one can improve his/her creditworthiness through the factors mentioned above.

Also read this: The Right Lender For Obtaining A Personal Loan