When you approach a bank for a loan, bank or any financial institution ask for your CIBIL score or credit score which is very essential for disbursement of the loan. Loan eligibility also vastly depends on your credit score or your credit history.
Whenever you take loans, a data is submitted by lenders to credit reporting agencies like CIBIL (Credit Information Bureau India Limited) on a regular basis.
Here are 5 must-know points while availing Loan.
1. A healthy CIBIL score is important to improve your creditworthiness if you are planning to take a loan. A bad credit score means you are going to find it increasingly hard to get a loan or credit card.
2. A credit score will be between 300 to 900. Please note that higher the score less is the probability of default. If your credit score is near to 900 which means that there are very fewer chances of you going default.
3. Bad or unhealthy habits of making late payments or defaulting on your equated monthly installments or dues will affect your score negatively.
4. A home loan may not be necessarily bad, but an unsecured loan like credit cards could weigh on your credit score because these forms of loans are easily available. High utilisation of credit limit will only prove that you are in desperate need of funds.
5. Incase of credit cards, the primary card holder is responsible for charges on both the primary and add-on credit card. Any default with any of the cards will impact on the credit score of the primary account holder.
Individuals should take utmost care to improve your CIBIL rating, if you are planning to take a long-term loan, especially something like a home loan.