CIBIL score or credit score is a three-digit number that represents an individual’s creditworthiness. It means it shows how a person has behaved as a borrower over the years. This rating ranges from 300 to 900, and a high credit score signifies a responsible borrower; hence higher this score, the better it is.
Now, borrowers preparing to avail of credit should know that 750 is the minimum CIBIL score for Personal loan required to get it without hassle.
Besides knowing the ideal CIBIL score for availing a personal loan, one should also learn how to improve on this pointer to better their chances of getting a loan.
5 tips to increase credit score
Here are some tips that individuals can keep in mind to the maximum CIBIL score possible –
- Making timely payments
The easiest way to increase credit score is through on-time payment of outstanding. Missing or late repayment, even for a single instalment, can hurt an individual’s credit score.
- Diversifying the credit portfolio
Maintaining a balance of secured and unsecured credit can help individuals to improve their credit score. Also, diversifying their portfolio with long and short term loans can portray a borrower as a responsible one.
Keeping a diverse portfolio like this will help prospective borrowers to obtain the best personal loan deals without any hassle.
- Keeping credit utilisation in check
The credit utilisation ratio carries about 25% weightage in determining the credit score of an individual. This ratio signifies the percentage of credit used against the available credit limit. Thus, experts suggest keeping it within 30%-40% is a good practice to better CIBIL score.
- Refrain from multiple credit applications
Once an individual applies for a loan, the lender places an inquiry to check the credit profile of that borrower. These queries are reflected as hard ones on a credit report and remain for more than a year.
Thus, making multiple queries like these in a short span can adversely affect an individual’s credit score and may lead to the rejection of a loan application. Thus, stay away from making multiple credit applications to improve the minimum CIBIL score for loan.
- Rectify the discrepancies on the credit report
Financial experts suggest that individuals should check their free CIBIL score and report periodically for any errors in it. Discrepancies in this report can lead to the lowering of the CIBIL score; hence, rectifying such mistakes will better this score.
Being mindful of the ways to improve credit score can aid individuals to better their credit profile and achieve a good CIBIL score. Moreover, along with these pointers, individuals should also be aware of the benefits of having a high CIBIL score and use it to their advantage to get a personal loan to meet their financial needs.
Advantages of maintaining a high CIBIL score
Here are some advantages of maintaining a high CIBIL score –
- Get better loan terms
Also, borrowers can take advantage of their improved credit score to negotiate and get better loan terms, such as low additional charges, suitable loan tenor that works for borrowers, flexible repayment structure, etc.
- Negotiate better interest rates
Individuals with a high CIBIL score can leverage their position to avail the best personal loan interest rates.
- Faster approval
Since the resolution to the debate of CIBIL score vs credit score is that they are the same concept, maintain it can result in faster approval of loan applications.
Furthermore, if debtors opt for lenders extending pre-approved offers, it can also streamline their loan application process. Such offers are available for financial products like personal loans, business loans, credit cards etc. Individuals can check their pre-approved offers by submitting their essential contact details.
Being aware of the minimum CIBIL score for a loan can encourage potential borrowers to improve their ratings. However, it is crucial to understand that this will not happen overnight; rather, it takes a planned and conscious approach to achieve a high credit score. Also, attaining this feat is not the end of the road; prospective borrowers need to maintain their credit score as well to reap its benefits.