If you are thinking of getting a home loan, an auto loan or a personal loan from a lender, a good CIBIL score can be a game changer. All banks as well as lenders rely on credit scores to gauge loan applications (whether to lend or not, what interest rate should be levied etc.) and they will trash the application if the score is less than what is mentioned in their list of prerequisites.
Defining TransUnion CIBIL Score:
In India, the Credit Information Bureau India Limited (CIBIL) amasses all-encompassing data of financial and credit history of each and every individual customer as well as those borrowing for commercial purposes by connecting with all registered lenders. Based on the available records, a score (ranging from 300 to 900) is assigned to the customers. The higher your score, the greater your credit worthiness. This is how they decide if you can be trusted to repay a loan/EMI in time. As per the recent statistics from the bureau, close to 79% of secured and unsecured loans are sanctioned to people with 750+ score.
Getting Your CIBIL Score:
From the day your credit card is approved or your loan is approved and disbursed – a credit score is automatically created on your behalf as you begin to repay the EMI, which will be reported to CIBIL instantly.
Building A 750+ Credit Score?
Let us first find out what your score is. Did you know that you are entitled to one free copy of your credit report a year from CIBIL? If you apply for more than one CIBIL report a year, you will be charged a small fee for the second credit sheet onwards.
If you are planning to get on board, that is if you have never required a loan or credit card, now would be a good time to get yourself a credit card or acquire a loan. Always remember to strike a balance. For instance, taking out only secured loans like home loan, gold loan or auto loan is not a good idea. Balance it out with unsecured loans like personal loans. This way, they can assess how you handle different types of credit in a disciplined manner, which will move that score up.
Sometimes a bad score might happen due to no fault of yours. It could just be some technical error(s). Again, it is important that you keep a track of your credit report and rectify such errors at the earliest. You are also advised to keep an eye on your debt to income ratio. In fact, it is strongly recommended that you keep use no more than 40% of your credit card limit. You have to accept that building a good score doesn’t happen overnight. Time and patience are of essence.
Summing it up:
Truly, nothing can be more tragic than a bad credit score when you are in dire need of cash. A missed EMI here and a rejected credit card application or a late payment there – you may not even remember these ‘small’ incidents until you get your CIBIL report. So mind your credit manners.