Healthy CIBIL report helps to improve chances to get a loan.

In 2000, First ever credit bureau was established in association with a US credit bureau Transunion for Helping individual with their credit scores and credit reports. CIBIL Transunion established it’s marked by providing the scores to individuals who had taken loans and credits. CIBIL (Credit Information Bureau India Limited) was widely chosen by the banks and NBFCs(Non-Banking Financial Institutions) and helped it get the details of borrowers in order to get a better management system for credits. And also made it easy for a financial institution for the reference check in order to know the creditworthiness of an individual and eventually even companies.

CIBIL report then became an important aspect in each individual’s and even financial institution’s life. As stated above, it became easier for anyone to know past payment history, the amount owed, credit mix, length of credit histories and new credits they have applied for. And these are exactly the five parameters which make the score. Let us now understand the basic difference between CIBIL Score and CIBIL Report. CIBIL score is a three-digit number ranging between 300-900 where 900 is is considered as highest and 300 is to be the lowest. The creditworthiness is checked by the range of the score. Any score between 300-600 is considered lowest, any score between 600-750 is average and 750+ is highest. The score is this and the credit report has the detailed information of Individual. Starting for a score, personal details like Name, Address, Email, Mobile Number, PAN card, Aadhar Card etc. With that, it has detailed information about the credits that have been taken. From the time the credit account has been open, till it’s repayments and also when it was done and ending details. If any defaults, missed or delayed payments, are also mentioned in the report. Along with this, the last segment has details of all the credit inquiries that have been made till date. Credits here consists of credit cards and the loans both!

A Healthy report is the one which has the score 750+ as a start. All the personal information correct and verified. Major of the credit account with the status as closed and not settled of the one which is completed. The once which are open should have proper payment history i.e. no missed or delayed payments. Not too many new credit inquiries in a short span of time as that show a credit hungry behavior. Everyone should understand that nowadays all the financial institutions check the report and the score before sanctioning the loans or the credits or the credit card limits. If major of the above-mentioned criteria are fulfilled even the lenders are happily sanctioning the loan as that is like a low-risk profile for them. If suppose the score is low, or there are previous missed and delayed payments, too many of accounts settled, then that gives the impression to the lender as the borrower is not a responsible one and if the new credit or the loan is approved for him, that can straight away be a risky thing as he or she might repeat the same mistakes as done earlier and hence the credit may go on toss!

After knowing the fact of chances of getting a loan in an easier manner, know the fact that when the score is good and a report is healthy it is also added to the fact that the interest rates are lower. Suppose a person with 750+ score is planning to take a personal loan and a person with 650 score is planning to take a personal loan then there will be a minimum of 1%-2% difference in the Personal Loan Interest Rate. And sometimes even more. So be wise and always try to maintain your credit score and report healthy!

Why it is difficult to get a personal loan with no credit history?

No matter how rightly prepared you are financially, life will throw something on you which will take you to financial crises and you will be finding a lot of answers to get immediate cash to deal with the ongoing situation. The very first thing which you would do is to seek help from friends and family and ask for their help financially. If you are lucky and your friends and family are generous, you will get a quick loan from them in no time and you have the option to pay them off with ease without paying them any interest.

If you do not find any right option from them, you will have to apply for a loan as last resort and hope to get it sanctioned within a particular deadline. The best loan for such situations is personal loans. You find a lender online and think of applying for one going to their branch keeping with you all the documents needed to get the loan done. Once you have applied for the loan, you then wait for their positive revert and hope to get the money credited to your account. Unfortunately, you get a call from the lender stating your loan is been rejected because you do not have a credit history and why would that be because you are applying for a loan for the first time in life. Now you restart your research and find lenders who would provide you personal loan with no cibil score but you have no luck in it and you are finding it really hard to get a loan with the current credit status of yours.

What would you do in such a situation? Is it really that hard to get a personal loan with no credit history? Today we are here to solve that dilemma for you,

Is credit history that important?

Yes, the credit history is important if you are trying to avail a loan or a financial product. A credit score is a graphical representation of your financial decisions in front of your future lenders. The loan lender will always check how your payment patterns were just to make sure before they can provide you a loan. If you do not have a credit history it is really hard for the lender to figure out if they can sanction you a loan or not.

What are my options here?

As we all say, there always is a place where we can start. You can apply for a small secured loan which will have minimal documentation in place and it will get you a loan with ease. For example, you can apply for a consumer durable loan like buying a television or a mobile phone and you can get a loan sanctioned within minutes of applying. In this process the documentation is minimal and you have the option to go for the products interest free! This will not only help you build a credit score but will also help you get a personal loan in the future if in need. This will not only help you start the credit history, but will also help you build a positive one if the payments are done on time.

Is there a deadline?

This is a tricky one. It definitely takes time to build your credit score but at least you can start. Something is better than nothing is the principle you should stick to and again make all the payments on time to build a healthy credit score.

Starting a credit line and a credit score is always tricky and you will have to be really couscous when it comes to building it. You can do it with ease if you have financial integrity with you.

Why banks provide you a lot of benefits if you have good credit score

What does it mean to have a good credit score and does a good credit rating translate into some actual benefits for you? Credit rating is a statistical tool that gives a score ranging from 300 to 900 to an individual. A score of 700 and above is considered good; obviously the higher it is the better it is for the person whose being scored. A high score could entitle you to certain benefits and you could get some preferential treatment. Here is the reason why banks are willing to offer benefits to those who have a high score.

Why do banks offer benefits for a good credit score?

Credit score are tools that aid the decision making process for the lender. Banks do not accept all loan applications that come to them. They want to provide loans only to those applicants who they feel can be trusted and our capable of returning what they borrow. For this they have a list of eligibility criteria that the applicant must comply to; apart from that they also consider the CIBIL score of the applicant.

The CIBIL score provides them a statistical and objective assessment of the creditworthiness of the applicant. A look at the credit report tells the bank about your credit history and how regular or irregular you have been in the past in repaying your dues. This lets them take an educated guess on the likelihood of you defaulting or not in your future borrowings. The CIBIL report also lets the lender get a fair idea about your overall debt obligation and how leveraged you are. If you already have a lot of running loans then the bank may not want to lend you more as you may find it difficult to repay the dues in a timely and regular manner. The report also contains information about any loans or credit card dues that may have been settled in the past or if there are any other remarks on your past borrowings.

The credit score also gives a risk assessment of the borrower. Looking at the rating the borrower can assess the risk profile of the applicant, since it is an objective assessment there is no room for bias or subjectivity. So a low CIBIL score means that the applicant is a high risk borrower and the converse is true for a high CIBIL score.

Lenders charge interest on the funds lent for the use of funds and as well for the risk of default by the borrower (which they undertake) when they sanction a loan. A high score means less risk which may prompt the banks to offer concessions to the borrower like lower interest rate on the loan, faster processing of loans (lesser time take in due diligence) and waiver of certain fees. Thus a good sore makes you an attractive and creditworthy customer for the lender, they reward this by offering you benefits. A high rating also gives you more choice in terms of which lender to approach, thus you can approach the one who offers the most lucrative terms and conditions for the loan.

Benefits of a Good Score:

If you do not have a high score then it does not mean that you will not get a loan or a card. Depending on the score you could get a loan but maybe at more stringent terms or you may be able to borrow at higher rates from only certain lenders. A very low score would certainly mean that you cannot get a loan sanctioned from the organized sector. Here we take a brief look at the benefits of a good score:

  • Lower interest rates: This by far could be the biggest benefit that you can get due to a good score. Lenders may offer by loan at concessional rates to those who have a good score. Even if the rate is lowered by half a percent then it could translate into huge savings especially in the case of a home loan which runs for long periods and usually run in lakhs.

  • Faster sanction of loans: Banks have to carry out various checks and verification procedures before they sanction a loan. A low score could mean additional check and a more detailed scrutiny. A good score eliminates the need to do so and the lender is willing to sanction a loan with minimal delay.

  • Fee waivers: This is something which will depend on a good score and also the negotiating power of the borrower. So if you have a good score you can negotiate the waiver of fees like the processing fee, legal fee etc.

So make sure to be a responsible borrower as a good score not only makes it possible for you to get a loan but it also entitles to various benefits.

Why you should change or lose a few habits to improve creditworthiness?

Banks are always in the urge of giving out loans to people. The more loans they give out, the more they can earn through interests. On the other side of the game, we consumers are always in need to some loan or the other. There are needs and wants of ours which can only be fulfilled through getting a loan, needs like medical emergencies and maybe wants like buying a luxury car or purchasing a house. If taking a loan is that important, what are the criteria’s which are important to avail any loan.

Your total experience, the company in currently work in, your salary, your existing lines of credit and many more are the criteria’s which you need to adhere when it comes to availing a loan. The most important of all, which determines if you can have a loan with ease, is the credit worthiness. How do you know if you are credit worthy? When you apply for a loan, the banks with other verifications conduct credit verification and check your cibil score. A credit score is a number which represents how you are doing financially.

There are lots of things which add up to your cibil score. Sometimes the credit score is perfect for a loan or a financial product to avail and sometimes you have to work hard to improve cibil score. Improving your bad credit score is a very long way to go and also you will have to look after not to fumble on your way.

Here are some tips on do’s and don’ts to get your score up,

Don’ts

Late payments

This is the most basic practice you can do when it comes to getting your credit score up. Understand your finances and adhere to due dates of your existing line of credit and loans.

Do not carry big balances

Keep your credit utilizations low, let’s take a number here. If you have a credit card with a limit of 1, 00,000 rupees, make sure you only use 40% of it. This will not only keep a cap on spends, but will also help you get your score up.

Defaulting

Do not default any loan and get it to a non-performing account. A non-performing account will not only hamper your cibil score, but will stick to your credit report for a very long time and will make it difficult to get a loan.

 

Do’s

Check your credit file frequently

If you are one individual who has multiple loans and credit lines on your name, you must check your credit score frequently. Sometimes, the credit bureaus make mistakes on your report and you are the one who tends to pay the price for their mistakes.

Create a healthy relationship with your bank

Your banks are the one who send reports to the bureaus on a frequent basis which adds up to your credit score. if you happen to skip a payment or two, you can explain your situation to the banks and they can on their discretion give you time to make the payment to avoid the loan defaulter list. Not only credit wise they can also help you with speedy loan process, if you are in need to one.

Use variety of credit lines

If there are multiple credit lines towards your account, here are high chances to get your credit score up in no time. More the credit lines and loans, more you will be looked as credit worthy and the one who takes their financial seriously. Just do not default any payments as this can work vice versa.

Just by improving basic financial habits, you can help your credit score grow in a positive way. Simple financial integrity can help you in many ways you can imagine.