It is very important to know about your credit score before taking a loan. If you do not calculate it properly, then you may have to bear a lot of losses. Once your credit goes bad in the eyes of the bank, your problems may increase.
Be it a job or a businessman, everyone needs to take a loan sometime or the other. But getting a loan is not that easy either. It is a long-drawn process and many times people are not able to get the desired loan at better interest rates even after a lot of effort or they have to face many difficulties in this way.
A major reason behind this is having a bad credit score, while sometimes the lack of information on complex financial matters also becomes a problem, due to which the borrowers do not understand the situation properly and they have to return empty handed. have to return.
How is credit score determined
The credit history of an individual or company in the country is mostly assessed through the Credit Information Bureau India Limited (CIBIL). CIBIL is a credit rating firm with more than 2400 members. This includes financial institutions such as NBFCs, banks and home financing businesses. The credit history of over 55 crore customers and organizations is managed through CIBIL Score.
It is to be noted here that CIBIL has no role to play in whether a financial institution will approve a loan or credit card to a borrower. But yes, it can definitely be said that it plays a vital role in forming an instant opinion about the loan aspirant. Hence, if you have a high CIBIL score then your chances of getting a loan are higher. If your loan gets approved despite a low CIBIL score, then understand that the interest rate charged would be very high.
Improving credit score is not easy
Repairing a bad credit history can be a challenging task, but it is not impossible. Improving credit score may take a lot of time and effort, but it pays off in the long run by helping an individual get loans on better terms and at lower interest rates.
Let us know about some steps to be taken to improve the credit score and increase the chances of loan approval: –
Credit report check
One can go to one of the credit bureaus (Equifax, Experian or TransUnion) to get their credit report. It is important to review your report to identify errors or omissions. Only then can you ask them to fix it.
Pay on time
One of the best strategies to maintain a good CIBIL score is to repay the loan on time. This way the borrower can make a positive impact on the lending company and will not face any difficulty in borrowing further. If this thing is said in simple words, then one of the biggest reasons for low CIBIL score is delay in payment of loan dues. In such a situation, a person should opt for a loan either through a credit card or according to his income and ability to pay on time.
Use credit card in limit
One of the most important ways to improve your credit score is not to use up your credit card limit. Ensuring that only 30 per cent of the credit limit is spent can go a long way in improving the credit score. Actually spending more than 30 percent through credit card shows that you increase your expenses without thinking. This will reduce your score.
Secured credit card
If one is having trouble getting a traditional credit card, then a secured credit card can be a good option. Secured credit card can be issued to any individual against fixed deposit. Its limit is decided on the basis of money deposited in the fixed deposit. If you use it correctly then it can help in increasing the credit score.
Maintain balance in credit mix
The credit mix should always be balanced. When the credit score drops, people often cancel that credit card and apply for a new one. Don’t do this. This can have a negative impact on the CIBIL score. According to experts, there should be a balance between secured and unsecured credit mix to maintain a good score.
