CIBIL score is one of the most important criteria in the approval of a personal loan application. It is a three-digit numeric summary of your credit rating, repayment history and credit report.
CIBIL score plays a very important role in getting you a low-interest rate loan. If you have a high credit score, the lender considers you reliable as a borrower. It enhances the chances of your loan approval.
But if you have a low credit score, the lending institution may not even consider your loan application. Hence, you need to improve your CIBIL score to get a quick personal loan.
Let us have a look at the ways to improve your CIBIL score and its impact on the loan interest rate!
Impact of CIBIL score on personal loan interest rate
Different lenders charge varying interest rates on personal loans from different borrowers. This is because every individual has a different CIBIL score that signifies his credibility.
An applicant with a high CIBIL score is being considered good at paying his debts and bills on time. It shows his willingness to repay his existing loans and debts and works as an assurance for the lender.
Lenders are always more willing to lend a lower interest rate loan to an applicant with a good credit score rather than one with a low credit score. You should check your CIBIL score for personal loan approval before making an application.
Here are some ways which can help you maintain a good CIBIL score and avail a low-interest rate on loan.
Pay your debts on time
If you pay your existing loans and debts on time, it creates a positive impact on your credit score. You should always try to clear all outstanding debts before making a loan application. It will not only improve your CIBIL score but also help you in availing a low-interest rate loan.
Check your credit report regularly
You must check your credit report at regular intervals to keep it error-free. There might be mistakes in your credit report that can lower your credit score. Checking your credit report can help you identify errors and rectify them.
Avoid reaching credit card limit
You should always make sure that you do not use your credit card balance up to its limit. Reaching your credit card limit is not good for your credit score.
Maintain an optimum credit mix
Maintaining a balanced combination of secured and unsecured loans is vital for your credit score. More unsecured loans indicate high liability. While more secured loans are a sign of unavailability of free assets for collateral security. An adverse credit mix is harmful to your credit score.
Avoid making numerous credit applications
Your credit score is being inquired by the lenders every time you make a credit application. Hence, you should try to avoid making too many loan/credit card applications at any given time.
Now that you know the importance of credit score for a low-interest rate on your loan and the ways to improve it, you can go ahead and get a quick personal loan.