Any individual looking to obtain a loan or a credit card from a bank or a financial institution will most certainly need to possess a good CIBIL score in order to do so. While there are other factors involved in determining whether an individual is eligible for a loan or not, a high CIBIL score is the most important determinant in this day and age. In fact, it is nigh on impossible to acquire a loan or a credit card without a decent CIBIL score to highlight an individual’s creditworthiness.
What Is A CIBIL Score?
A CIBIL score is a numerical representation of an individual’s credit history. Everything from loan and credit payments, bill payments, outstanding dues, etc is reflected in an individual’s CIBIL report, which shows whether he or she is financially stable or not. This is distilled into a numerical representation between 300 – 900 that represents the individual’s CIBIL score. Usually a score of above 750 is considered acceptable by banks and financial institutions to approve a loan or credit card application.
What Can An Individual Do To Improve His or Her CIBIL Score?
There are many ways through which individuals can raise their CIBIL scores in order to acquire a loan or a credit card. Some of the most common ones are as follows:
- Pay off outstanding dues – Individuals with pending or outstanding dues on other loans or credit cards generally have low CIBIL scores. This severely affects their chances of acquiring loans or credit cards from lenders since it is a reflection of poor financial health on the part of the individual. By paying off these dues quickly and consistently, CIBIL scores are positively affected, which in turn prove the individual’s creditworthiness to the lender he or she is approaching. Outstanding credit card dues are generally considered to be one of the main causes of low CIBIL scores. Therefore it is in the individual’s best interest to pay them off as soon as possible.
- Maintain low debt – Individuals with huge debts also have a lower chance of acquiring loans or credit cards due to the detrimental effect it has on their CIBIL scores. Lenders look into the amount of loan debt an applicant has acquired over a period of time, as well as his propensity to pay off the debt. Accumulating debts over a considerable duration negatively affects an individual’s CIBIL score, making it less likely for that individual to be granted a loan or a credit card. By maintaining a low debt balance, customers can keep their head above water even after taking on more loans.
- Make payments consistently – Banks and financial institutions also take into consideration the frequency with which an individual makes repayments towards any other outstanding loans or dues he or she might have. Paying off other debts consistently helps increase an individual’s CIBIL score and acts as proof of the person’s financial health. Lenders are more likely to roll out a loan or credit card to such individuals, safe in the knowledge that the applicant will not default on any of the payments.