Why You Should Take Your CIBIL Score Seriously

An individual with a regular credit history of more than six months will have a CIBIL score ranging from 300 to 900, wherein a higher score represents a lower risk of default for the borrower. So, an individual with a credit score of 800 is seen as a better borrower than an individual with a credit score of 600. It becomes imperative for you to take your CIBIL score seriously, as having a better credit score entitles you to the following benefits:

1. Reflection of your credit habits

Your credit score is not just a three-digit number, but a reflection of your credit habits. Your CIBIL score is accompanied by your credit report, provides information about the nature of loans (including credit cards) held by you. It includes your repayment history, overdue status, amount outstanding and so on. Hence, banks and financial institutions can have a fair idea about your credit habits by checking your credit score and credit report.

2. CIBIL score determines your loan eligibility

Your CIBIL score determines your access to credit, as banks and other financial institutions generally have a minimum credit score criteria to sanction a loan. Many credit institutions have automated their processes for loan approvals. Hence, credit score becomes an important input in defining your eligibility for the loan since it quantifies your credit habits and repayment history.

3. Your CIBIL score impacts your loan interest rate

One of the leading public sector banks, Bank of Baroda, had recently offered interest rates on its specified loan products linked to the credit score. Such interest pricing helps the lenders to connect the interest rates directly with the credit risk associated with the borrower. Thus, a good CIBIL score can certainly justify lower credit risk premium charges by the lender and consequently lower interest rate on loans. Having a better credit score may lower your loan interest burden.

4. Better CIBIL score may speed up loan processing

Financial institutions tend to incline towards having a lower proportion of non-performing assets in their portfolio. Having a good credit score may help you be a preferred customer for banks. They perceive you as a borrower with low risk of default, as reflected by your credit history. Hence, you can expect faster loan processing, leading to a reduced time lag between loan application and loan disbursement.

5. Better offers on Credit Cards/Personal Loans

Banks and other financial institutions are always on a lookout for sincere borrowers with a clean credit history. Having a good credit score can also help you encash your better reputation in terms of being eligible for credit cards with better offers and loans tailored for you.

6. Improved Bargaining Power for better terms for the loan

When you have a good credit score, banks will be inclined to have you as their customer. You can turn this preference to your advantage by bargaining for better terms for your loan including lower interest rates, longer tenor, security, etc. For example, if you have a clean repayment record and lower debt outstanding, you can easily negotiate for a loan with longer tenor or a loan without any collateral, etc.

With CIBIL score assuming a key role in determining your loan terms, it is important that you take your credit score seriously. Take any corrective steps for any deficiency at the earliest possible opportunity.

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