Why is Credit Score important for getting loan sanction

 

The Credit Score works as a first impression for the lender, the higher the score, the better are your chances of the loan being approved. The decision to lend is solely dependent on the lender and Credit Score does not in any manner decide if the loan/credit card should be sanctioned or not.

 

What is Credit Score?

Credit Information Companies (CIC) collect, analyse and maintain credit data of borrowers after which, a Credit Score is given to the person /entity. This credit score is a number that may be between 300 to 900. In general Bank/financial institutions, assess score as under:

Best Credit/CIBIL Score or Bad CIBIL Score

-        A credit score of 750-900 is an excellent score and shows responsible financial behaviour.

-        A credit score 600 to 750 is a medium score, indicating a little concentration on financial behaviour. This could have happened due to a delayed payment, write off or settlement of debt or overdues.

-        A score below 600 which is a poor credit score need to make quick and drastic financial decisions to improve credit score.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Factors affect Credit/CIBIL Score

 

 

How to improve CIBIL/Credit Score

ü  Always pay your dues on time: Delayed payments are observed negatively by lenders

ü  Keep your balances low: Always be wise to use too much credit.

ü  Keep a healthy mix of credit: It is healthier to have a mix of secured and unsecured loans

ü  Apply for new credit in restraint: apply for new credit cautiously, it reflects that you are continuously seeking excessive credit.

ü  Monitor your co-applicant, guarantor and joint accounts regularly: In co-signed, guaranteed or jointly held accounts, you are held equally liable for missed payments.

ü  Review your credit history frequently: Monitor your Credit/CIBIL Score and Report regularly to avoid unpleasant surprises in the form of a rejected loan application.