What happens if your CIBIL rating is high? Why is the CIBIL score so crucial? These questions have answers available for you if you’re looking for them. A credit score is a three-digit number determined by your previous and present credit activity and provided by any of the credit bureaus, including CIBIL, Experian, Equifax, and CRIF High Mark. This ranges from 300 to 900, with higher numbers suggesting trends in responsible credit behaviour. A high credit score makes loan approval quicker.
A personal loan is one of the most common borrowing options for people who are looking for fast access to cash for several personal reasons. However, because this loan is collateral-free, lenders must verify the credibility of the applicant. In this regard, one of the first things to be considered by potential lenders is the credit score of the loan applicant.
All lenders check the CIBIL score of the borrower before approving your loan application. Thus, a high CIBIL score is essential to get loan/credit card approval. But there are many more benefits associated with a higher credit score.
What is a Good CIBIL Score?
Your credit score is represented in a three digit-figure that ranges between 300 and 900. It is used by lenders to evaluate your creditworthiness and loan repayment capacity. A credit score between 750 and 900 is considered good in India. Having a good CIBIL score increases your chances of availing of credit cards and loans. 750-900 is a good credit score range.
A higher CIBIL score makes you appear a responsible borrower among lenders and reflects a solid payback track record. A lower credit score might impact your loan approval as the lenders might be apprehensive about your loan repayment capacity. A good CIBIL score in India indicates that you have been a good and responsible borrower.
Although credit score is not the only factor to determine an individual’s eligibility for getting a personal loan, home loan or credit card, it is one of the first factors considered by lenders while reviewing loan applications. A lack of credit history or a low credit score raises concerns about an individual’s ability to repay because the lender may not assess the risk or consider the applicant a high-risk borrower.
Good CIBIL Score Range
750-900 is considered a good credit score range in India. Having knowledge about the CIBIL score range will help you maintain your credit score effectively. CIBIL score ranges between 300 and 900. To maintain a good credit score in India, making timely payments and avoiding default at all costs is important. This will not only improve your chances of availing of loans in India but will also position you as a responsible borrower if you want to apply for loans in the future. The table below mentions what is a good CIBIL score range in India.
Advantages of Having a Good CIBIL Score
Low-interest rates
Applicants with higher credit scores get lower interest rates. If you have a high credit score, lenders will offer you a comparatively lower interest rate for getting credit such as a personal loan, home loan or credit card. Even a half percentage point increase in interest rates can impact your EMIs and, consequently, your finances. Thus, loans with low-interest rates are one of the benefits of a high credit score.
Loan with long term
If you have a high credit score, you can get a loan with a longer repayment period. Opting for a longer-term loan will result in lower monthly payments. This will help you in reducing your repayment burden, thereby enabling you to repay the loan amount on time.
You can check your CIBIL score online by visiting the official CIBIL website and submitting the online application form. You also need to pay a small fee for this service sometimes. You must understand how to check your CIBIL score as it is a major deciding factor in loan application approval.
Fast Loan/Credit Card Approval
If you have a good CIBIL score, then you can get a credit card with a higher limit. However, make sure that you do not overuse your credit card and that you make your credit card payments on time. If you do not comply, your credit score may suffer in the long run. If you have a good credit score, you will be eligible for additional bonuses and incentives on your credit card in addition to a higher credit limit.
Additional credit card benefits:
Before approving a credit card application, lenders look at your EMI and income ratio to measure your repayment capacity and check your credit profile by reviewing your CIBIL score and report. A high CIBIL score indicates good credit behavior and will help lenders make important underwriting decisions such as setting a higher credit limit on your credit card or offering a reward program such as cashback.
Better chance of higher limit on loan
- A higher loan amount means increased risk for lenders. So, even if a loan is approved for a person with a low credit score, the quantum of loan provided may be much less than the loan applied for by them.
- Increase your opportunities toget pre-approved loans from banks
- A pre-approved loan from the bank is a great way to get a personal loan from the bank instantly. However, these loans are not given to every customer. There is a good credit score threshold and a lot of inspection in the form of your account balance before issuing a pre-approved offer. If you have a good credit score, your chances of getting a ‘pre-approved’ and ‘personal’ loan from your bank or credit card may be higher.
Better negotiating power with your lenders
All lenders prefer to give loans to creditworthy customers who will repay their loans promptly. If you are a customer with a high CIBIL score, you can become a desirable borrower. This can give you an edge over other customers and, in the process, you can negotiate with the lender for a better interest rate or lower processing fee.
Factors Affecting your CIBIL Score
Your credit score is one of the most important factors when applying for a loan. After knowing what is a good credit score, it is imperative to maintain it consistently. Below are some factors that affect your CIBIL score.
Inconsistent credit behaviour: Your credit history reflects your credit behaviour. If you fail to pay your monthly instalments on time, your credit score is negatively impacted. To maintain a good credit score, diligently pay your monthly EMIs.
Credit mix: Your credit mix includes the number of financial instruments you have availed of, such as credit cards, and secured, and unsecured loans. Having a good credit mix shows your ability to handle different loans effectively, which, in turn, will make your score fall under the good credit score range.
Not paying outstanding debt: Outstanding debt can greatly impact your credit score. Before applying for another credit product, make sure you clear your outstanding debt.
Applying for multiple loans: When you apply for a loan, it initiates a hard enquiry on your credit report by lenders. This could potentially reduce your credit score. Hence, it is advised to only apply for one loan at a time.
Conclusion:
You must build and maintain a high credit score over time. A high credit score will ensure that you get access to credit at a low-interest rate, and get pre-approved loans offers and other beneficial terms from lenders.
Good CIBIL Score – FAQs
1.What is a good credit score in India?
750-900 is considered a good credit score range in India. Having a high CIBIL score greatly improves your chances of availing of loans.
2.Is 750 a good CIBIL score?
Yes. A credit score above 600 is considered satisfactory. Further, if you have a credit score of 750 or above, it is considered excellent.
3.How long will it take to increase my CIBIL score from 600 to 750?
If you want to improve your CIBIl score, ensure that you make timely EMI payments, do not apply for multiple loans at once, and rectify errors in your credit report if any. This will help you increase your credit score.
4.What are the factors that affect CIBIL Score?
Various factors affect your CIBIL score, such as delayed EMI payments, too many loan applications, failed payments, improper credit mix, and outstanding debt.
