Why a good Credit Score is important?
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.
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.