Do banks check the CIBIL score before loan approval? Here’s what you should know!

Your credit score is a huge determining factor when it comes to loan approval. It is one of the first things that a bank or financial institution checks when you approach them, making it an important aspect of your financial life that you just can’t afford to ignore. Of course, your complete profile will also be considered, but do take special care of your score.

A good starting point would be to get a free CIBIL score from the credit bureau so that you know where you stand. This is an especially crucial step prior to loan application. Read on to know more about the credit score, and how it impacts you.

What is a credit score?

A three-digit number between 300 and 900, the credit score is generated by a credit bureau. It is a crisp overview of your credit report, which tells a lender about your creditworthiness. A high or good credit score can open doors in the financial world for you, when it comes to making an application for a loan or credit card. While every lender’s criteria may differ slightly, there is no doubt that a score of 750 and above will make anyone sit up and take notice!

What goes into a credit score?

Wondering what are the parameters at play when it comes to your credit score? Read on to know more!

  • Payment history on past as well as current loans and credit card accounts

  • New credit that you have availed of

  • The length of credit history, i.e. how old your accounts are

  • A credit mix, which consists of various debt products

  • The credit utilisation ratio, which indicates just how much you seem to rely on credit

Other factors that banks consider

In addition to the credit score, banks also consider certain other factors such as your income and the amount you currently owe on existing loans and credit cards. They also look at the amount of loan you have requested for, together with the loan tenure. Whether your application is for a secured or unsecured loan will also have a role to play, especially keeping in mind your income and expenses.

However, here’s why the credit score is important. Say for instance you apply for a personal loan for low CIBIL score. Here, a bank may not reject your application outright because of the other factors being considered. However, a low score may not give a lender the confidence to offer you the best rate of interest since they too need to hedge their bets.

How to improve your credit score

Given the above, you’d agree that it is indeed important to make sure that your credit score is not just high but that it remains that way as well. Here are some crucial tips that should help you on your journey to improve your credit score.

  • Making payments in time: Being late on your credit card and loan payments can pull your score down. The situation is further complicated if you skip making the payment entirely, as this looks alarming from a lender’s perspective.

  • Do not default on loans: Charged off or settled loan and card accounts reflect negatively on your credit report, as do accounts that have gone into collections. Do make sure that you work out a solution to repay existing debt if you don’t want your score to dip drastically as a result of these charges.

  • Maintain old credit cards: Don’t shorten the length of your credit history if you have a good, old card account. If you have maintained it well by ensuring timely payments, this can in fact give your score a boost.

  • Applying for fresh credit: It’s simple, really – if you don’t need a loan or card, don’t apply for one! Not only does it make you look like you’re constantly in need of credit within a short interval, but every such application results in a hard enquiry on your credit report. This impacts the score, albeit temporarily.

  • Apply for a credit card: The above doesn’t hold true if you want to start building a credit score, however! Apply for a new card and be sure to use it prudently – this can instantly help boost your credit score.

  • Check your credit report: At regular intervals, do make sure that you check what’s in your report, because any erroneous or inaccurate information can prove detrimental to your score. Further, you need to make sure that every account mentioned therein belongs to you – protect yourself from identity theft even as you protect your credit score!

In conclusion

It’s important to remember that while a personal loan for low CIBIL score is not impossible, it is also not optimal at the same time. Instead, with some perseverance and patience it is better to improve your credit score.

Start with availing a free CIBIL score from a credit bureau today, so that you can take charge of your financial health confidently, now and well into the future!

Good Credit Score is Beneficial for Instant Loan Approvals

People take loans all the time- home loans, personal loans, auto loans- the options are plenty. However, the process of applying for a loan and actually receiving the funds is a long and tedious one. There are many people who don’t get loans at all, even after numerous attempts. So, what can you do to get a loan as quickly as possible? If there is one thing that you can do, then it has to be credit score improvement!

How Does Good Credit Score Benefit Loan Applications?

When a bank receives a loan application, then it checks a variety of things before approving the same. These include the applicant’s repayment history, existing debt, credit utilization ratio, length of credit history, etc. However, the most important thing that it considers is the credit score.

Your credit score lets the bank know how high your creditworthiness is. So, if your score is low, then it would suggest that you face problems with credit and personal finance management. However, if your score is high, then it would know that it can count on you for the loan’s repayment and that the risk of defaulting is minimum. Hence, it would approve your loan application rather quickly.

Apart from instant loan approvals, high credit score also helps in the following ways:

1. Better Rates

If you seek more affordable loans, then you have a very good reason to increase credit score. This is because those who have a good score are able to get lower interest rates from the banks. When your score is high, then you know you have the leverage at the time you want to negotiate with the bank. You can urge the lender to offer better interest rates in light of your good track record as evident by the good rating. More often than not, they agree without giving you a hard time.

2. Bigger Loans

As the loan amount increases, so does the risk for the lender. So, if you want a big loan, then you can increase the odds of getting approval by checking your free credit score first. If you see that your score isn’t up to the mark, then you can work on it before you submit the applications. Otherwise, when you need a loan on an urgent basis, then you might be able to get only a small portion of the same from the bank.

3. More Options for Jobs

You may find it surprising but many companies, especially in the finance domain, now review the credit reports of the candidates who appear for jobs. Usually, they check if they i.e. the candidates have ever defaulted on a loan in the past or if their score is up to the mark. The idea behind this measure is that if someone has a bad credit history, then they are also unlikely to be suited for a professional job. This again has to do with the usual association of bad credit rating with personality traits like lack of discipline, time management problems, etc.

You may not necessarily be judged on the basis of your credit rating when you appear for job interviews. However, if you don’t want to take any chances, then it’s strongly recommended that you increase credit score as much as possible before proceeding.

4. Higher Credit Card Limits

Most credit cards come with fixed limits and you can only spend within these limits and not a penny more. Naturally, you would want the highest limits possible so that when you are in a cash crunch or in case there is a financial emergency, then you can use your credit cards for help. Now, here is the thing- the lenders are usually more willing to increase the limits when the users have a good credit rating. So, if it’s high credit limits you seek, then you should check your free credit score today itself and see if it needs some improvement.

As you can see, there are numerous benefits of a good credit score. So, if you ignored yours so far, it’s time to take control and make improvements. Always remember- a good rating will help in your entire life!

Worried About Life After Retirement? Get Income in Your 60’s

Planning your retirement doesn’t have to be challenging. There are many ways to boost your savings for the twilight years and live life comfortably even after you have retired from your job permanently. The following are some of the best options to consider:

1. Senior Citizen Savings Scheme (SCSS)

SCSS is one of the most popular savings schemes for retirement as offers a high interest rate of 8.4% and also allows for tax deduction at the time of investment. However, there is one downside to this scheme which is that the maximum amount that you can invest is Rs. 15 lakhs. If your spouse also invests, then the limit can be increased to Rs. 30 lakhs.

2. Public Provident Fund (PPF)

The Public Provident Fund (PPF) is another popular long-term investment plan which has a tenure of 15 years. It offers a tax-free interest rate of 8% which is compounded, meaning that the returns are quite high. Also, both the principle and interest are supported by sovereign guarantee to make it a safe investment.

3. Atal Pension Yojana (APY)

If you are within the age group of 18-40 years, then you can invest in Atal Pension Yojana i.e. APY. As the name suggests, it’s a pension scheme in which you can deposit money on a regular basis to receive a regular pension after you retire. You get the option to receive a monthly pension of Rs. 1,000, Rs. 2,000, Rs. 3,000, Rs. 4,000, and Rs. 5,000. If you pass away during the tenure, then your spouse can receive the pension instead.

Apart from the popular investment schemes that are discussed above, you can take certain measures to save more money for your retirement:

Take Loans Once When You Have to

It’s possible that from time to time you may need to take a small business loan or personal loan. However, you should be careful with debt, especially when you are close to retirement. So, take a loan when you have no other option. Also, try to clear all your debt by the time you turn 60 and avoid getting lured by attractive interest rates or pre-approved loans that your lender may offer you on the account of your good credit score.

Take Care of Your Health

Staying healthy becomes more and more important as you age. Not only poor health affects your lifestyle, but it can also make a big dent in your savings that you might be saving for your retirement. So, try to improve your diet, exercise on a regular basis, and take measures to lower stress as much as possible.

Educate Yourself on Investments

There are all kinds of investment options depending on your budget and requirements. While there are standard pension schemes that are discussed above, there are other options as well which include mutual funds, stocks, bonds, etc. You can earn a lot more through these options, granted you know what you are doing. So, whenever you get free time, try to learn more about these investments and how you can maximize your earnings.

Protect Your Credit Score

Your credit rating is something that you need to protect all your life. This is because the score affects everything- the interest rate on a home loan, business loan, credit cards, etc. also your job prospects. You may have to pay high health and auto insurance premiums if the insurer checks your credit score before calculating the amount.

Save on Taxes

Did you know that there are many ways you can reduce your taxes? For instance, if you are investing in PF scheme, 5-year tax-saver fixed deposit accounts, etc. and paying a premium for health insurance, etc. then you can deduct these amounts from your taxable income and pay fewer taxes to the government.

Bottom Line

It’s understandable if you are anxious about your retirement. When you are old, then it becomes difficult to do lots of things that you are able to do today without any problems. However, financial planning can make your twilight years safe and stress-free to a huge extent. This is why it’s best to start working on a roadmap as soon as you can. Good luck!