Importance of CIBIL Score for Personal Loan
Personal Loan is an unsecured service in which, you can avail financial assistance from the banks in order to fulfill your personal needs. Nowadays, Personal Loan is easily accessible as almost all lending institutions provide this service. But there are some factors on which it depends. And, Credit score is a major factor amongst them. Thus, If you have a good credit score then you will get a personal loan very easily. Otherwise, you might have some problems in getting a personal loan.
What is a Credit Score?
To initiate, Credit score is basically a measure of the behavior of a customer’s banking. That is, it records the financial activity of a person. If you have paid your debts in time and your banking record is healthy, then your Cibil Score will be good. Or else, it will be low. This powerful three digit number ranges between 300-900. Hence, In order to fall under the excellent Credit Score category, Your credit score should be greater than 750.
What is Zero Credit History?
To begin, the applicants who have never availed a loan or credit card before have Zero Credit History. Such an applicant has a Credit Score of either 0 or -1 by default. In such a case, the banks and NBFC’s are not able to get any insight into the ability of the loan seekers to repay the amount of loan. Therefore, such applicants are generally denied a personal loan. If you want to improve the chances of getting a loan, you should either build or improve your Credit Score.
Ways to Increase Your Credit Score through Personal Loan
- Avoid Simultaneous Applications– First of all, if you apply simultaneously for a Personal Loan in different banks, your CIBIL score will decrease because each time you inquire your CIBIL, it gets decreased by 2 points.
- Amount of Loan- Also, it is significant to avail a practical amount of Personal loan in order to increase your CIBIL score. Because, if by any chance you are not able to repay the amount of loan, your CIBIL Score will be further affected negatively.
- EMI’s Repayment –Furthermore, You should always repay your EMI’s of Personal Loan on time. As it is a considerate factor that affects your credit history in long run. So always pay your EMI’s properly so as to increase your credit score.
- Lower your credit usage –In addition, Always try to keep the usage of your credit less. Doing this will also help you to increase your credit score. Thus, try to use 50-60% of your salary in order to maintain a good credit history.
- Multiple debts –Moreover, do not take too many loans at a time. As this can convey a hungry credit behavior to the banks that can further decrease your chance of getting the approval.
- Avoid Foreclosure of a Loan – Finally, Try not to close your loans before time. Even if you have money to close your loan, even then, it is better to continue the loan for the entire tenure so as to improve your Credit Score.