Ever wondered…why your loan request gets rejected even after fulfilling KYC norms, OR why you are getting loan at higher than expected ROI? Below information can sort out most of your queries.
CIBIL is one of the most important factor ,Banks and other lending institution takes into account while deciding whether to approve your loan request or not.What does CIBIL mean, Why CIBIL score is so important for Banks to review , How does it effects your ROI?
Before we move further, it is important to dig in some basic information about CIBIL.
What is CIBIL
Full Form of CIBIL : Credit information bureau India Limited.
Meaning: India’s first Credit information company basis which various financial and lending institutions check the credit worthiness of those who are seeking for loan or any type of credit facility.The 3 digit score ranging from 300 to 900 forms the basis of your credit approval. A score above 750 usually is beneficial for the borrower to get their credit approved.
Report contains the following details:
1. Your score.: Your CIBIL score is calculated base on your Credit Behavior as reflected in the “Accounts” and “Enquiries” section of your CIR, ranges between 300 – 900. A Score above 700 is generally considered good.
2. Basic details :Contains your name, date of birth, gender and identification numbers such as PAN, passport number, voter’s number
3. No. Of Enquiries.: Every time you apply for a loan or credit card, the respective Bank or financial institution accesses your CIR. The system makes a note of this in your credit history and the same is referred as “Enquiries”
4. Repayment history.: This section contains the details of your credit facilities including name of lenders, type of credit facilities (home, auto, personal, overdraft, etc.), account numbers, ownership details, date opened, date of last payment, loan amount, current balance and a month on month record (of up to 3 years) of your payments.
Now., Every institution have got their parameters set for calculating the eligibility of the individual.Having a good credit score with minimum enquiries is a must plus with a good repayment record.Having delays while repaying your credit cards and personal loans will definitely create problems while availing loans.
Note: CIBIL is a database of Credit Information. It does not make any lending decisions. It provides data to banks and lending institutions who use it as a quick and efficient resource to filter loan applications.
NOW, REASONS FOR REJECTION EVEN AFTER GOOD CIBIL:
- 1. Any settled OR Written Off loan in the past.
- 2. Guarantor on Defaulted loan.
- 3. If you are marked as a default by error.
- 4. More Unsecured Debt.
- 5. Live in a particular postal code.
Tips to Improve your credit score:
- First check your credit score here, if you really need to improve or not.
- Always be regular with your monthly payments.
- Pay your Bills on Time.Pay not only the minimum due on your credit card bill but pay in full. Pay only minimum due affects your credit score negatively.
- Another important factor in the calculation of your credit score is credit utilization ration.It is calculated by taking the amount of credit your are using divided by the total amount of credit limit you have.For ex: if you have credit card with limit of 1 lakh and you use around 10K each month then your credit utilization ration will be 10%. Lower ratio has positive impact on your CIBIL score.If you have an offer to increase your credit card limit you can do so and limit your expenses to the same level so that your credit utilization ration will become low.
- Do not ever apply for too much extra credit cards just to lower down your credit utilization ration because it create too many enquiries on your credit report which results in lowering your CIBIL score.
It is recommended to take professional help to improve your Credit Score as the 3 Digit score summarizes your overall Credit History. Also, any further rejection decreases your score as it implies that lenders have turned you down because of your poor credit history.
You can check your CIBIL score for free here
You can also check our article on how to get cashback on every credit card payment here.