The process of applying for a personal loan can involve several steps. But, ultimately, it comes down to how credible you are when it comes to repayment of credit or any debt. So, banks and financial institutions check CIBIL scores to gauge your reliability before granting a personal loan or any credit. Your CIBIL score provides a great overview of your creditworthiness.
To make sure that you have a good credit profile, you should check your CIBIL score. You can check the CIBIL score by PAN card as well. Typically, the CIBIL score ranges from 300 to 900. You should maintain your CIBILscore above 750, as recommended by CIBIL. The higher your CIBIL score, the more are the chances for your personal loan to get approved. Also, you can avail of a personal loan at a lower interest rate compared to an individual with a lower CIBIL score. So, check the CIBIL score to see where you stand.
How does CIBIL score impact interest rate?
Your CIBIL score determines what interest rate you would be asked to pay while availing of a personal loan. Before diving into the details about the impact a high CIBIL score can have on the interest rate, let’s look at the loan repayment process. Fundamentally, any personal loan that you may avail of has to be repaid with interest over a certain period of time. The amount borrowed from the bank consists of the principal and the interest.
Your CIBIL score will not have any impact on the principal amount that has to be repaid. However, it has an impact on the interest that you have to pay. If you have a high CIBIL score, the bank identifies you as a credible individual with a good track record of repayment of credit and debt. For that reason, banks and financial institutions offer a personal loan at a low interest rate to individuals with a high CIBIL score.
How can you improve your CIBIL score?
Raising your CIBIL score increases your chances of availing of a personal loan. It also can reduce your financial burden by making you eligible for a lesser rate of interest. Here are some in which you can improve your CIBIL score.
- Increase the credit limit on your credit card.
- Have a balance of secured and unsecured credit to boost your CIBIL score.
- Pay your credit card bills and EMIs on time. Avoid late payments or repayments at all times.
- Do not maximize the use of your available credit. Maintain your credit usage to 15% – 30%.
- In case of errors in your CIBIL report, fix them immediately.
- Request your bank to increase your credit limit.
- Maintain your history credit and do not close any old credit accounts.
Maintaining a high CIBIL score can help you boost your chances of availing of personal loans giving you the advantage of a low interest rate. To understand more about the CIBIL score, Finserv MARKETS is the best place. Finserv MARKETS can help you learn how to check your CIBIL score and the different kinds of personal loans.