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Maintaining a good credit score is critical these days, especially if you’re planning to apply for a loan to meet an expense. Funding the purchase of a new car, home, or even a new phone might not always be easy without some financial assistance. Many people choose a personal loan, credit cards, etc., to ensure that they can spend on things that they wish for. Herein, a person’s CIBIL score becomes the main determinant to keep these material wants flowing.
But what is a CIBIL score? And what role does it play in the lending process?
Here’s all that you need to know about the CIBIL score:
CIBIL score, also known as a credit score, is a figure that is calculated to define a person’s credibility for loans. The three-digit number can be anywhere between 300 and 900. Lenders and credit card providers check an individual’s score before lending them money.
A credit report is the record of an individual’s borrowing and credit history, collected from a number of sources, including financial institutions, credit card companies, collection agencies, and more. When you apply for a new loan or a credit card, your repayment history gets reflected in this credit report. Credit rating agencies use a mathematical algorithm to arrive at your credit score using this information.
A good CIBIL score falls between 750 and 900. The closer a person is to the 900 mark, the better are the chances of his/her loan application being approved. A credit score is essential for all types of loans, like a personal loan, education loan, etc. Moreover, building a stable credit score takes time, it can take between 18 to 36 months or higher credit usage to reach a good credit score so that you apply for a loan.
Additional Read – CIBIL Score Myths Debunked
Now that you know what CIBIL score is, you must understand its relevance in your loan application process. A credit score can have many benefits when applying for a loan. Here are some:
Home, marriage, and even student loan interest rates are decided depending on the loan applicant’s credit score. A high score makes a person a better candidate. Sometimes lenders also offer additional discounts or waive off some fees for applicants with a high score. One must aim to maintain a decent score at all times.
It can be hard for someone with a low or moderately average CIBIL score to get a significant loan amount. The higher the sum, the more difficult it is to repay the loan. Therefore, individuals in need of considerably high funds such as a housing loan must maintain a steady score.
The willingness of the lender to approve a loan and to do so quickly depends on the creditworthiness of the loan applicant. For people with a good score, the approval process is relatively quick. One has to submit the necessary documents, and the funds are credited to his/her account in the stipulated time. People with a low score, on the other hand, may have to go back and forth, negotiating interest rates and tenures.
Additional Reads – Top 4 Things You Should Know About CIBIL Score to Get a Personal Loan
The CIBIL score plays a crucial role in a person’s financial goals. Whether it is a well-planned travel loan or an unexpected medical loan, the one thing that can ensure that nothing comes in the way of a person’s monetary needs is a high credit score. Individuals must make sure to always pay their credit card bills and EMIs on time and keep a check on the credit score, so they are able to improve it if it ever starts to fall.
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Policies, Codes & Other Documents