Having a low CIBIL can be a pain, especially when you are vouching for a loan! We can understand the problems that it creates for people, but this post will solve all your problems once and for all. We have made sure to brief you from the basics and equip you with all the knowledge to make sure that you don’t face any CIBIL related problems in the future.
Table of Contents
What is a CIBIL Score?
Let’s understand the basics so that we are clear about everything involving CIBIL.
CIBIL is the numerical representation of the creditworthiness of an individual. Credit agencies take numerous factors into account, including past credit history, to assess every profile and award number to come with a CIBIL score. Some of these factors are –
- Amount of outstanding Debt
- Length of credit history
- Past payment behavior
- Credit Utilization Ratio
- History of credit cards
- Making a lot of credit applications together
This CIBIL score will help every private and Government company assess your profile and issue you a loan.
Having a high CIBIL score is crucial as it increases the chances of getting an attractive interest rate on your loan. The chances of getting a loan are also directly dependent on CIBIL.
Different CIBIL Score Buckets
Different CIBIL score buckets have been divided according to the data available about a particular person. We have listed the buckets here so that you can understand the terminologies.
- NA or NH – These terms are indicated on profiles that do not have a credit history. For everyone who has not availed any loans and no credit information has been reported in the last 24 months.
- 1-5 – These numbers indicate that the applicant has a credit history of fewer than six months.
- 300-900 – These numbers are indicated for all individuals with a credit history of 6 months or more. 300 is the lowest with 900 being the highest.
A score of more than 700 is generally considered good.
How can we check our CIBIL score?
You can get to know your CIBIL score from a variety of sources. Let us list some of these –
- You can request your CIBIL score from your Bank by paying a specific fee. Every Bank has a separate charge, and you can check it on the Bank’s Website
- The authority maintaining and producing CIBIL scores is called CIBIL. You can request your CIBIL score by buying one of the subscription plans that they offer
CIBIL also offers a free variant for individuals. You can check your CIBIL score for free using this link
How and Why low CIBIL is a problem in the loan process?
Having a low CIBIL score can be a big problem for your loan application. Every bank and private company accesses your CIBIL score before processing your loan.
Having a low score indicates that you are less likely to follow a regular payment structure. This results in significant banks denying your loan and getting to ask private companies which charge 3-4 times or more of the average interest rates.
One small mistake can cost you dearly, but there are ways by which you can improve your score. Let’s shed some light on these ways.
How to Improve CIBIL Scores Immediately!
There are ways using which you can improve your CIBIL score immediately. Let’s understand these ways in detail –
1. Customizing your credit limit
You can customize your credit limit on your credit cards according to your demands. You must make it a point always to spend less than your credit limit. Touching your limit or exceeding it has an adverse impact on your CIBIL score.
The best way to take care of this point is to customize your credit limit according to your needs and plan it way ahead.
2. Maintaining Older credit cards
Discontinuing an old credit card erases all your credit history associated with it. If you have been maintaining a good credit history with your card, you must continue it even if you don’t plan on using it.
This will help boost your score.
3. Maintain a strict payment schedule
Discipline is a critical factor while paying your Credit. The best way to accomplish this is by setting reminders and planning the payments well in advance.
Not paying your EMIs on time not only invites a penalty, but one small credit default can hamper the CIBIL score significantly.
4. Choose your loan time wisely
You always have many options while choosing the time to repay your loan. Choosing a longer time is still better as it reduces the monthly payment, thereby easing your payments.
Paying small amounts over a long period will also help to improve your CIBIL score.
5. Check on the number of loans you take at a time
Taking more than one loan at a time is bad for your CIBIL score. It signifies that you are taking more loans than you are capable of repaying. It is a sign of bad payment habits.
Make sure to take one loan at a time and think of the next one only when you have processed the first one.
6. Taking on more Credit! Yes, exactly
By default, your CIBIL score will below if you haven’t availed a loan in the past. If you plan to take a loan and a low CIBIL score is a problem, the best way is to take a short term and a long term loan, which will build your credit history. This will qualify you for lower interest rates and favorable terms.
7. It is also common for CIBIL reports to show the wrong figures and payments. Make sure to check your CIBIL report carefully, and if you find any mistakes, you can always ask for a revision and get it corrected.
How can we resolve low CIBIL problems and different ways to do it
The solutions mentioned in the last section will help you to improve your CIBIL score. But if you are looking for a loan at the moment and have a low score, you can still get a loan using some measures. All the ways mentioned in this list will help you to get a loan at the moment.
- Choose to apply at an NBFC
- If you have a bad credit score, it is better not to apply at banks as every application will further hamper your credit score. Instead, apply at an NBFC, which will process your loan.
- Show past records of regular payment on your loans. Some of these might not be present on your credit report but will be valid to build your case.
- Present strong evidence of current income sources like your salary to prove the ability to repay the loan.
- If you are not approved for a specific amount, you can ask for a lower loan amount, which is often processed immediately.
- You can also apply for a joint loan with someone with a good credit score. A guarantor top of your loan will also do the job.
- You can also choose to apply for a secured loan by giving some collateral. Collateral can be anything ranging from jewelry, automobiles to property.
We are sure that you are now equipped with all the knowledge and tools to improve your CIBIL score. Just by following all the steps in this guide, you can significantly improve your chances of getting a loan, as well as the rate of interest that you get.
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