A good CIBIL score is essential for obtaining loans and credit cards from banks. A low CIBIL credit score can lead to higher loan costs and difficulties in securing loans. Your CIBIL score reflects your credit discipline and loan history. To improve your CIBIL score, follow these steps:
- Maintain a Low Credit Utilization Ratio: It is recommended to keep your credit utilization ratio below 30 percent for a good CIBIL score. If you find it challenging to stay within the existing limit of your credit card, consider applying for a credit card with a higher limit.
- Timely Repayment of Loans and Credit Card Dues: Repaying loans and credit card dues on time has a significant impact on your CIBIL score. Ensure that you repay all your loan installments and credit card bills within the designated due dates to maintain a good CIBIL score.
- Diversify Your Loan Portfolio: A diversified loan portfolio with a mix of secured and unsecured debt can help improve your CIBIL score. Credit cards are examples of unsecured debt, while home or vehicle loans are secured debt. Having a healthy balance between the two types of debt can positively impact your CIBIL score.
What is a CIBIL Score?
A CIBIL Score is a three-digit number ranging from 300 to 900. A higher score indicates a better creditworthiness. Generally, a score above 750 is considered good and increases the chances of loan approval. The report containing this score is called a CIBIL Report.
The CIBIL report provides banks with a person’s credit history, including any defaults on previous debts. It also shows the number of loans a person has taken, along with the amount and duration of previous credits. This information helps banks assess the risk of defaults and reduce potential losses.
CIBIL Score and Loan Rates
In addition to facilitating loan approvals, a good CIBIL score enables borrowers to obtain loans at lower interest rates. For instance, State Bank of India (SBI) offers home loan rates based on the borrower’s credit score. For those with a CIBIL score above 750, SBI offers a regular home loan at 9.15 percent. The rates increase to 9.35 percent for scores between 700 and 749, 9.45 percent for scores between 650 and 699, and 9.65 percent for scores between 550 and 649.
Improving and maintaining a good CIBIL score is crucial for obtaining favorable loan terms and financial opportunities. By following the steps mentioned above, you can enhance your creditworthiness and increase the likelihood of loan approvals at lower interest rates.
