Top 4 Things You Should Know About CIBIL Score To Get A Personal Loan

Many people often run out of cash before the month ends and the next month’s salary comes to the bank account. One may also end up requiring additional cash to meet certain emergencies, be it for a medical exigency or a social function or even to account for certain expenses if one is running a business.

Taking a personal loan has become easy these days with multiple lenders vying for the borrower’s attention. But the actual approval of the loan depends on certain factors.

The most critical of these is the credit history as captured by a credit score assigned by independent agencies based on past borrowings and repayment history.

TransUnion CIBIL is one of the most prominent agencies generating credit scores in India and is part of the global firm TransUnion. Previously known as Credit Information Bureau (India) Limited, or CIBIL, it was the first to introduce the concept in India, and so the credit score is also known as the CIBIL score.

Key Things To Know

• What It Is:

The credit score is a three-digit number derived by independent private agencies such as TransUnion CIBIL by scanning an individual’s previous loans, including ownership of credit cards and other borrowings, and repayments. The number varies between 300 and 900. The closer the score is to 900, the higher are the chances of your loan application getting approved.

• Why It Is Important:

The CIBIL score is an important part of the loan application process. Although the CIBIL score is not the final word for availing a loan, it is the first filter. After one applies for a loan, the lender first checks the credit score and report of the would-be borrower. If the score is below the lender’s threshold, the loan application can be rejected. Even if the lender approves the loan, it would charge a higher interest rate to compensate for the risk of lending.

• Which Factors Affect It:

If one has missed payments for using a credit card or for any equated monthly installment related to a loan in the past, the score would be lower. This would show that lending to the person could be risky.

• How Can One Improve The Score:

One can improve the credit score by paying back the dues on time as late payments are viewed negatively by lenders. Secondly, one should not be too heavily under debt as a large amount of outstanding loans also pushes the score down. This is especially so for unsecured loans. Also, make sure you do not keep applying for loans as multiple applications tend to show how desperate you are to borrow.

Conclusion

Availing a personal loan is an easy and swift process but is dependent on one’s credit history captured by credit score that ranges between 300 and 900.

A higher score is important, though not the only factor, to avail a loan. If one has a low score one can still get a loan but the interest charges could be higher. At the same time, one has the option to plan ahead and improve one’s credit score for future borrowings.