Your CIBIL Score plays a vital role when you apply for credit as it demonstrates your creditworthiness. While you can now get a loan in just a few hours with 100% digital application and disbursal, don’t miss out on doing a CIBIL Score check before you apply. This simple step can not only help you avoid rejection, but also help you get affordable credit.
Read on to recognize the relationship between your CIBIL Score and loan interest rates, and what you can do to improve your score.
The impact CIBIL Score has on the interest rate of your loans
To assess your cost of borrowing, you are sure to consider the interest rates levied by lenders. A high interest rate means a high borrowing cost and vice versa. Lenders consider a number of factors before deciding on the interest that is appropriate for your loan application. Among these is your credit or CIBIL Score.
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Your CIBIL Score gives the lender a comprehensive view of your past credit behavior. Based on this, they assess your future behavior. The score ranges between 300-900, where a score above 750 indicates a low-risk profile. This essentially means that you have the ability to make timely and full repayment, lowering your risk of defaulting on the loan. As a result, it becomes feasible for a lender to offer you credit at competitive interest rates, which reduces your cost of borrowing.
Availing a secured or unsecured loan on CIBIL Score below 750 can not only result in a high interest rate, but also in rejection. Having a poor CIBIL Score implies that you are new to handling credit, have delayed or defaulted on repayment in the past, or don’t have the ability to repay new credit. Thus, you carry a higher risk. As a result, lenders are less hesitant to offer loans on CIBIL Score that does not meet the threshold. This doesn’t always mean that your loan application is rejected. It can result in you getting a loan of a smaller amount with a higher interest rate to offset the lender’s risk.
3 smart tips to improve your credit score
There are a number of factors that are considered in the calculation of credit score. This includes your repayment history, credit utilization ratio, debt-to-income ratio, types of credit availed, and outstanding accounts. Maintaining financial discipline across these segments can help you maintain a good CIBIL Score and boost it over a period of time too.
Improving your credit or CIBIL Score is not something that you can do overnight. It takes time and consistent efforts to increase your creditworthiness. Here are 3 simple and smart tips you can follow.
- Repay your dues on time
Your repayment history carries a high weightage in your credit score calculation. Making timely repayment is one of the most important and easiest ways to ensure that your credit or CIBIL Score is on the higher side. You can set reminders or standing instructions to make sure that all your EMIs or credit card bills are paid on time and in full.
- Keep a check on how much you utilize credit
Credit utilization is basically the amount of credit you have used against the credit limit you enjoy. A high ratio indicates that you have a less than ideal handle over your finances and increases your profile risk. Keep this ratio below 30% to maintain a good credit or CIBIL Score. For instance, this means not swiping your credit card up to its limit every month.
- Take immediate actions to rectify errors in your credit report
Conducting a CIBIL Score check on a regular basis allows you to keep an eye on the data that goes into the calculation of your score. Any errors in this can dip your score, so watch out for these and report it to the financial institution at once.
By conducting a regular CIBIL Score check, you can also arm yourself with insights that can help you improve your CIBIL Score and get fast approval on loans. While you can conduct a yearly free CIBIL Score check on the CIBIL website, just one check isn’t sufficient. You can use other lender websites to check your CIBIL Score for free. Bajaj Finserv is a leading NBFC offering a CIBIL Score check service that is free, quick and easy. Use this service by filling up your basic details and get results in just a few minutes. This way, you can do a CIBIL Score check easily at any time and from anywhere. Check your CIBIL Score today and be proactive about maintaining your credit health for more affordable credit.
