Want a cheap and quick loan? First strengthen your CIBIL score, know 5 important things
Want a cheap and quick loan – If you want to get a loan easily and at a low interest rate, then it is very important that your CIBIL score is strong. Banks and finance companies check the CIBIL score before approving the loan. If your score is good, not only will the loan be approved quickly, but you can also get a loan at a lower interest rate.
What is a CIBIL score?
A CIBIL score is a 3-digit number between 300 and 900, which is decided on the basis of your credit history and loan payment habits.
700+ CIBIL score – considered good, chances of getting a loan are high.
600-700 CIBIL score – average, but loan can be obtained with some conditions.
Score less than 600 – There may be difficulty in getting a loan or the interest rate will be high.
Major credit bureaus that issue CIBIL score in India:
- TransUnion CIBIL
- Equifax
- Experian
- CRIF Highmark
Benefits of a good CIBIL score
✔ Faster loan approval
✔ Loans at lower interest rates
✔ Chances of getting higher loan amount
✔ Credit cards and other financial facilities are easily available
5 easy ways to improve CIBIL score
- Pay all bills and EMIs on time
Why is it important?
If you do not pay your credit card bill or loan EMI on time, then apart from late payment fees, your CIBIL score may also fall.
What to do?
Pay all loans and EMIs on time.
Set auto-debit so that payments are made on time.
Make full payments instead of just making the minimum credit card payment.
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Use credit cards properly
Why is it important?
If you use more than 30% of the credit card limit, the bank feels that you need more money, which can affect the CIBIL score.
What to do?
Do not spend more than 30-40% of the credit card limit.
If you have to spend more, request the bank to increase the credit limit.
Pay on time, so that you can avoid interest and penalty.
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Do not apply for loan and credit card repeatedly
Why is it important?
By applying for loan or credit card repeatedly, the bank checks your credit report, which is called hard inquiry. CIBIL score falls due to more hard inquiries.
What to do?
Apply for loan or credit card only when needed.
Avoid applying for multiple loans at the same time.
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Check your CIBIL report
Why is it important?
Sometimes there are mistakes or old entries in your CIBIL report, which can reduce the score.
What to do?
Check your CIBIL report every 3-6 months.
If you see any mistake, contact the credit bureau and get it corrected.
Use the official website or bank portal to check CIBIL score for free.
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Maintain old credit history
Why is it important?
If you have an old credit card or loan account, do not close it quickly. A long credit history makes your CIBIL score look better.
What to do?
Avoid closing old credit cards unless it is non-essential.
Maintaining a long and good credit history helps in increasing the CIBIL score.
How does CIBIL score help in getting a loan cheap and fast?
Banks and NBFCs decide by looking at the CIBIL score:
- Whether the loan will be approved or not
- How much loan amount will be available?
- At what interest rate will the loan be given
If your CIBIL score is good, you can expect better interest rates and faster loan approval from the bank.
How much does the CIBIL score affect the interest rate in a loan? (Example)
Mr. Gupta needed an auto loan of Rs 6.29 lakh.
He applied for a loan from Bank A, which offered him an interest rate of 11.70%. His EMI was coming to ₹13,897.
Then he also asked for an offer from Bank B. Seeing his CIBIL score of 750+, Bank B offered him an interest rate of 11.30%, which made the EMI ₹13,771.
Mr. Gupta told Bank A that he was getting less interest.
Bank A reduced its interest rate to 10.34%, bringing the new EMI to ₹13,470.
The result?
In 5 years, he saved ₹25,604, just because of a good CIBIL score!
Conclusion: Easy tips to keep your CIBIL score strong
✔ Repay loans and EMIs on time
✔ Do not use more than 30% of your credit card limit
✔ Avoid applying for loans repeatedly
✔ Check your CIBIL report from time to time and correct errors
✔ Maintain your past credit history
If you follow these tips, your CIBIL score will remain strong and it will be easy to get a loan in the future!
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Thankyou for all your efforts that you have put in this. very interesting information.