Why a good Credit Score is important?

A credit score reflects your personal credit worthiness, and is of foremost consideration by financial companies before approving loans.

22 May,2020 01:15 IST 1678
Why a good Credit Score is important?c

A credit score is simply a number that reflects an individual’s creditworthiness. The three-digit score is calculated by Credit Information Bureau India Limited (CIBIL)  So, it is also known as CIBIL score. The credit score encompasses your entire credit payment history, over a given period of time, across the types of loans availed, and across different financial institutions. Credit score is of prime consideration by financial companies for sanctioning various types of loans, including personal loans. A good credit score reflects good creditworthiness, and thus a better chance to avail loans. 

What is considered a good credit score?
On the basis of your repayment behaviour and credit behaviour, a credit score can range between 350 and 900. Any score above 750 means that you are a reliable and genuine borrower. If you have a credit score above 750, it means that you can secure better deals on your loans.

If you are planning to apply for a personal loan for any sudden expenditure, or to fund any big-ticket purchase, you must always remember to check your credit score first. IIFL requires a minimum credit score of 650 for being eligible for a personal loan. IIFL personal loan up to Rs 25 lakh can be approved with the requisite credit score within 5 minutes, and the loan amount disbursed within eight hours. With minimal documentation and hassle-free online application, IIFL personal loans are among the best in the market.

How to know your credit score?
You can easily find your personal CIBIL score by visiting the IIFL website. After providing the requisite details, you can generate your personal CIBIL Credit Information Report (CIR).

Why is a credit score important?
A credit score is of paramount importance as it reflects the following key factors with regards to your credit history:

  • Credit score reflects your repayment history: Whether you have defaulted on payment of your EMIs, or made your credit repayments on time, all transactions pertaining to your credit repayment are shown in the credit score. You must remember that past repayment on your loans counts for 35% of your overall credit score. If you are planning to apply for a personal loan, then you must remember to pay your existing EMIs on time.
  • Credit score reflects your existing debt:  Before you apply for a personal loan, you must know that your existing debt counts for 30% of your credit score. A financial company will use the credit score to find the existing amount of credit sanctioned and utilised. This is also known as credit utilisation. 
  • Credit score reflects the type of credit availed: Financial companies look into the credit score to find whether an individual has availed a balance of credit. This factor contributes 10% to the credit score. In other words, before you apply for a personal loan, you must remember to create a balance of credit, or availing both secured and unsecured loans. Not availing credit altogether can also impact the credit score. 
  • Credit score reflects repayment duration: Your credit score reveals the duration of the loans along with your repayment history. The tenure of your loan contributes 15% to the credit score. 
  • Credit score reveals unsuccessful credit inquiries: You must remember that each time you make a credit inquiry, it is reflected in the credit score. Along with multiple credit inquiries, rejection of your credit request will result in a poor credit score.

The bottomline: Thus, it is important to have a good credit score for availing credit of all types, including personal loans. While a good credit score will help you to secure credit at an attractive rate of interest, you might end up taking loans at higher rates of interest with a poor credit score. With attractive interest rates, you can save money, and make progress on achieving your financial goals.

If after checking your credit score, you want to apply for a personal loan, then you can consider personal loans from IIFL.  You can use an IIFL personal loan to meet a wide variety of expenses, like domestic/international vacation, wedding, higher education, home/office renovation or purchasing the latest gadgets. Not only can you easily apply online, but you also get access to the IIFL Personal Loan EMI calculator to calculate EMIs instantly.

Know More Here: How to Qualify Your Personal Loan?

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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