Ready to take charge of your credit score? Explore its profound impact on loan approvals and leverage the power of Bajaj Finserv Credit Pass to stay ahead in your financial game.
When you think about taking a loan, what comes to your mind first? The amount you need, the tenure, or maybe the interest rate? But, there’s something equally important that plays a crucial role in getting your loan approved – your CIBIL credit score. So, let’s understand how to check a free CIBIL score, it’s importance and how it affects your chances of loan approval.
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Your CIBIL Credit Score
TransUnion CIBIL is our nation’s oldest and largest credit information company. It assigns you a score known as the CIBIL Score based on your financial history. How does it gather this information? Well, banks and financial institutions that you transact with regularly report your credit behaviours to credit bureaus like CIBIL. Based on these reports, CIBIL generates your CIBIL credit report and calculates your CIBIL credit score.
Your CIBIL Score will fall in a range of 300 to 900, and the higher your score, the better it is for you. Typically, most lenders agree that a score of 750 or higher is ideal. So, how is this three-digit score calculated? Five key factors contribute significantly to your score to varying degrees. The table below illustrates these factors and their weightage:
| Credit factor | Weightage |
| Repayment history | 35% |
| Credit utilisation ratio | 30% |
| Length of credit history | 15% |
| Recent credit enquiries | 10% |
| Credit mix | 10% |
Clearly, then, your score isn’t just a random number. It’s calculated based on certain credit behaviours. Have you paid your bills on time consistently? Do you have outstanding loans? How much credit do you use compared to what’s available? Do you have a long, established track record of responsible credit management? How many new credit products have you applied for lately? Do you have a diversified credit profile? These are the questions that make up your credit score.
Beyond these factors, one other thing can have a significant impact on your CIBIL Score: any errors or discrepancies that might have crept into your report. These could range from a simple clerical error with regard to the spelling of your name or some other personal information all the way to any kind of fraudulent activity that has been misattributed to your account. For this reason, keeping a close eye on your credit health by regularly monitoring your CIBIL Report is critical to safeguarding your creditworthiness.
How Credit Score is Connected to Loan Approvals
So, why does your CIBIL Score matter so much? Well, as a summary of your credit history, it indicates your creditworthiness. In other words, it tells lenders how reliable you are with borrowed funds. So, when assessing your loan applications, lenders check your credit score to determine the risks associated with lending to you. Furthermore, your credit score determines your eligibility for different kinds of credit products, all of which have different credit score requirements. Let’s take a closer look at how your CIBIL Score impacts your loan approval chances.
● Speedy Approval: A high CIBIL Score expedites the loan approval process by signalling your creditworthiness. Lenders, trusting a high score, process and approve your loan application more quickly.
● Reduced Interest Rates: Applicants with high CIBIL Scores often enjoy loans with lower interest rates. A high score indicates lower risk, and lenders frequently reward this with more favourable interest rates.
● Flexible Repayment Options: A robust CIBIL Score grants you flexibility in repayment terms, including the loan duration and repayment schedule. This empowers you to better manage your financial planning.
● Higher Loan Amounts: Your CIBIL Score significantly influences the loan amount you can secure. A higher score can lead to larger loan amounts, providing greater financial flexibility. Your elevated score suggests a higher likelihood of timely repayment, making lenders comfortable with larger loans.
● Interest Rate Determination: Your CIBIL Score influences the interest rate on your loan. A higher score often results in lower interest rates, decreasing your overall borrowing costs.
● Repayment Ability Indicator: Lenders use your CIBIL Score as an indicator of your loan repayment ability. They consider this when determining your loan approval, as it provides insights into your credit history.
● Risk of Rejection: With a low CIBIL Score, there’s a heightened risk of your loan application being declined. Lenders may interpret a low score as a signal of potential default risk.
● Improved Approval Chances: A high CIBIL Score enhances your chances of loan approval, as borrowers with high scores are perceived as less risky by lenders.
● Credit Status Awareness: Your CIBIL Score offers insight into your credit status, enabling you to gauge your creditworthiness. This knowledge assists you in making informed decisions about borrowing and debt management.
● Minimal Documentation: A favourable CIBIL Score often leads to reduced documentation requirements and lower interest rates, streamlining the loan application process.
Improving your Credit Score
If your credit score isn’t where you’d like it to be, don’t worry. You can work on improving it: you just need a plan and some patience. Here are some actionable tips that can help you get started on the path to healthier credit habits and an enhanced CIBIL Score:
● Pay your credit card bills and loan EMIs regularly and on time.
● Keep your credit card balances low and aim to use no more than 30% of your available credit limit.
● Maintain your old credit accounts in good standing by using them occasionally.
● Apply for credit only when you need it and avoid multiple credit applications back to back.
● Regularly check your credit report and score to spot any errors or discrepancies that may be dragging your score down.
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Bajaj Finserv Credit Pass: Credit Building tools at your Fingertips
If you’re wondering how you can keep tabs on your credit health and give your score a boost, Bajaj Finserv has you covered. The Credit Pass is an innovative tool that is a game-changer in the credit monitoring and management space. Here’s what it has to offer:
● Personalised dashboard: Benefit from real-time credit health report insights when you can track all your credit accounts in one place and monitor the factors that are affecting your score.
● Free credit score checks: Get monthly updates on your CIBIL Score so you can always be informed about your credit standing.
● Credit Score Simulator: Wondering what happens if you take a new loan or credit card you’ve been eyeing? This interactive tool can give you a sneak peek into the impact it can have on your credit score.
● EMI Calculator: Planning to take on a loan? Use this interactive tool to figure out how much you’ll need to pay every month.
● Free access: Enjoy unlimited access to all Credit Pass benefits for a full year when you sign up during the limited-time offer period.
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In essence, a solid CIBIL credit score opens doors to loans and gets you better interest rates, among a host of other advantages. It’s a big deal and you can’t afford to ignore it. So, keep an eye on your credit score and work on improving it by leveraging tools like the Credit Pass. Start today and begin your journey to better creditworthiness. Don’t just dream of loans – make them a reality with a stellar credit score.
