Tuesday, 27 September 2016

When Is Your Credit Score Good Enough?

Having a hard time getting a loan approved by the banks? Perhaps you should take a look at your CIBIL report and see if you have a low CIBIL score. By learning how to increase your CIBIL rating you can enhance credit score, and thus improve your chances of loan approval. However, how do you know that your score is good enough? Keep reading to find out.

What is a Good CIBIL score?
Any person’s credit score can range from 300 to 900, which are the absolute limits. So, the closer your score is to 900 the higher is the possibility of you getting a loan approved. Any score higher than 750 is generally considered good. However, people often get loans approved with a score lower than that too.
There are only 3 credit bureaus in India that are authorized by the RBI- Experian, Equifax, and CIBIL. Out of these three CIBIL is the most popular, and majority of banks obtain the credit report of a loan applicant from the same bureau.   Thus, if you are trying to improve your credit score then that’s where you should be obtaining your reports.

How do you Improve a Low Score?
If your score is lower than 600 then you should seriously consider improving it before you even start applying for loans. This is because if you will apply for loans with a poor score and you get rejected your score will take damage, which will make things even worse for you. Thus, it is best to start sending applications only when you are confident with your score.
Here are some of the best ways to enhance credit score:
1) Timely Payments
One of the simplest, yet most effective methods for improving credit score is becoming punctual with repayments. Whether it is your credit card bills, or loan EMIs, you have to pay your dues on time if you want a good credit score. Even if you have missed the last few payments you can take control of the situation and get back on the right track before it is too late.
2) Clearing Out Your Credit Cards
Many people don’t take their credit card bills seriously and prefer making minimum payments thinking they can pay the bills later.  This kind of approach is not good for anyone’s credit score. If debt is piling up on your credit card then you must do something about it before your CIBIL score is completely ruined. By clearing up your credit card dues not only you will save a lot of money on the interest and late fees, but you will also see a boost in your credit score.
3) Lowering Credit Utilization
If you are seeing your credit score dropping gradually every few weeks then high credit utilization ratio (CUR) could be the reason behind it. At best your CUR should not exceed 30%. Thus, for instance, if the limit on your credit card is Rs. 1,00,000 then you should not spend more than Rs. 30,000 a month if you want to ensure that you CIBIL score remains intact.  
4) Fixing Discrepancies
If you are lucky you can improve your CIBIL score easily if you can find discrepancies in your report and get them fixed.
 Managing credit reports of hundreds of thousands of people is a huge task, and often banks and credit regulation bureaus like CIBIL overlook mistakes or take wrong data into consideration when allocating CIBIL scores. It is only wise to check your report every once in a while. If you find any discrepancy then you can contact your bank and request them to rectify it. They will send updated data to CIBIL and you will get an updated report with an improved score.
Banks don’t approve loan applications so easily these days. They carefully analyze every application and especially check the CIBIL score of the applicant. Thus, you should never feel satisfied with your CIBIL score, no matter how good it is. You must try to keep on improving your CIBIL score not only to ensure you get a loan approved easily when you want but also to have the upper hand when negotiating interest rates with the bank.

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