Discover the power of a good CIBIL Score and navigate the world of credit confidently with a Bajaj Finserv Credit Pass membership.
Your three-digit CIBIL Score wields a lot of power in the vast world of money matters, capable of opening doors to exciting financial opportunities or slamming them shut. It’s a numerical summary of your credit history and lenders consult it every time you apply for credit. But what exactly is it about this score that makes lenders place so much emphasis on it?
Your CIBIL Score
Your financial behaviours are reported by banks, lenders, and financial institutions regularly to credit information companies that use that information to compile a credit report and calculate a credit score. In India, there are four RBI-licensed credit bureaus – Experian, Equifax, CRIF High Mark, and TransUnion CIBIL. Among them, the CIBIL Score is the most widely used; so much so, that the term ‘CIBIL Score’ is often used interchangeably with ‘credit score’ in India.
Your CIBIL Score falls within the range of 300 to 900 and reveals the story of your financial journey. If you`ve been responsible with your money, paid your bills on time, and managed your debts prudently, your CIBIL Score will be high. Conversely, a low CIBIL Score reflects poor financial management and can pose quite a problem if you ever require credit.
Why do lenders check your CIBIL Score?
Lenders have good reason to check your CIBIL Score every time you approach them with a credit application.
- Creditworthiness assessment: As a numeric representation of your creditworthiness, your CIBIL Score indicates to lenders whether you’re a good candidate for a loan. Think of it like a litmus test that helps them evaluate your loan repayment capacity and ascertain the risks involved in lending to you.
- Loan approval: Your CIBIL Score is factored into the decision-making process when lenders assess whether to approve your application for credit. A good CIBIL Score (generally considered to be 750 or higher) would typically hold you in good stead when it comes to successfully bagging approval for credit.
- Interest rate: Your CIBIL Score guides lenders when it comes to determining the terms on which you’re offered credit, including your interest rates. A higher score puts you in a position to negotiate a lower interest rate so you can save in the long run. A low CIBIL Score, on the other hand, might mean higher interest rates as lenders aim to offset their risks in lending to you.
The benefits of a good CIBIL Score
There are a host of advantages to building and maintaining your creditworthiness:
- Easy access to credit: Lenders are impressed with a high CIBIL Score as it shows your reliability as a borrower. This means they are more likely to trust you with their funds.
- Quicker approvals: With a solid credit score, your application process is often fast-tracked. In fact, you may even qualify for pre-approved credit offers that are very handy when you’re in a pinch.
- Better terms: A good CIBIL Score can get you credit at lower interest rates and longer tenures.
- Negotiation power: Lenders are happy to work with you to help you succeed when they see you have a high CIBIL Score. It gives you the leverage you need to negotiate better terms and deals for yourself.
- Higher limits: With a low CIBIL Score, you might often be rejected or be offered a lower limit than what you’d applied for. However, when lenders see a credit score that reflects good credit behaviours, they’re more comfortable with approving larger amounts.
How you can build a good CIBIL Score
Building a robust credit score is possible with patience and dedicated efforts towards practising responsible credit habits. Your CIBIL Score is calculated based on 5 key factors, when you address them methodically, you can successfully improve and maintain your credit profile.
1. Repayment history: Pay your credit card bills and loan EMIs in full and on time, punctually. Set up reminders or automate your payments, if you must, in order to meet your monthly financial obligations successfully.
2. Credit utilisation: Avoid using your entire credit limit. So, don’t max out your credit cards, and try to spread out your spending over multiple cards, if you have them. Ideally keeping your credit utilisation below 30% will be most beneficial as you try to improve your score.
3. Credit age: The length of your credit history is a vital factor influencing your CIBIL Score. A long, established track record of responsible credit management can significantly boost your credit score. Aim to use old credit accounts occasionally and keep them in good standing to maintain your credit history length.
4. Credit mix: A diverse credit profile is good for your credit health as it displays your skills at managing different credit types. If you already have a secured home loan and a credit card, try adding a collateral-free personal loan into the mix.
5. Credit enquiries: You should never apply for credit you don’t need, and you should always space your credit applications out. This is because every application triggers a hard enquiry into your credit report as lenders peek at your credit history to determine the risks involved in extending credit to you. Too many of these within a short period can damage your score considerably.
Finally, review your CIBIL report regularly. Errors and discrepancies, including fraudulent activities, can creep into your credit report and drag your score down. The best way to nip it in the bud is to monitor your credit report closely so you can identify these issues and get them rectified promptly.
How Bajaj Finserv Credit Pass can help
You needn’t undertake your credit-building journey alone. The Bajaj Finserv Credit Pass can help you monitor and manage your credit profile with ease so you can focus on improving your CIBIL Score. When you sign up during the limited-offer period, you unlock all these exciting benefits for free for your first year:
- Personalised dashboard with all your credit accounts in one place for a comprehensive overview
- Credit factors tracking, including your upcoming payment deadlines, credit utilisation, and credit enquiries, so you’re never caught off-guard
- Real-time credit health report monitoring, so you can catch any errors or discrepancies and get them rectified immediately
- Monthly CIBIL Score updates, so you’re always in the loop about even the slightest changes to your credit profile
- Credit Score Simulator tool for understanding how a credit product can impact your score even before you apply
- EMI Calculator tool for analysing the feasibility of a credit product based on what it might add to your monthly financial obligations
- Pre-approved offers that can be a boon in times of emergencies or when unexpected expenses arise
Whether you`re dreaming of buying a house, starting a business, or funding your child`s education, a good CIBIL Score can open doors to a world of financial opportunities. So, before you jump into your next financial adventure, remember to check your CIBIL Score. And if it`s not as impressive as you`d like it to be, don`t worry – you can take steps to make it better with the Bajaj Finserv Credit Pass in your hands.