Your ability to avail credit from any lender when the need arises is an important asset. Nobody can always be prepared for an emergency so when one arises, it is helpful if you are able to raise credit to deal with it. This could be especially true if you are facing financial difficulties during a medical emergency.
One of the key determinants of whether you are able to avail credit from your preferred lenders is your CIBIL score. Since your CIBIL score depicts your creditworthiness, a high CIBIL score convinces lenders that you will repay the credit responsibly and within the stated timelines. If you have ever wondered does CIBIL score affect loans and your ability to borrow, it is important to know that it does.
A personal loan is one of the most common forms of credit availed since it can be utilised in several ways. Through Bajaj MARKETS, you can avail a personal loan of up to Rs. 50 Lakhs that can be used to meet a range of needs. While the platform hosts a plethora of renowned lenders who offer loans with a flexible repayment tenure and interest rates starting as low as 10.49%, one of the key determinants of whether you can avail the loan or not is your CIBIL score. Your CIBIL score is required to be 600 or above in order for you to be considered eligible for applying for a loan through the platform.
The CIBIL score is a part of the Credit Information Report (CIR) calculated by credit rating agency TransUnion CIBIL. While the CIR details your credit history and ongoing debt-to-income situation, the CIBIL score is derived from its Accounts and Enquiry section. The CIBIL score is a 3-digit number ranging between 300 and 900. While every lender has their own eligibility criteria for what constitutes a good score, the general guidelines have been mentioned below.
Credit scores above 750 are considered “Excellent” and individuals with that score have a high chance of securing loan approvals.
A credit score ranging between 690 and 750 is considered “Average.” A CIBIL score in this range is less likely to be approved for securing a loan but an individual with this loan can secure a loan with a higher interest rate.
A credit score lower than 600 is considered “Bad” and individuals bearing this score have minimal or no chances of securing loans from prominent lenders in the market.
To know more about ranges of CIBIL score, you can read our detailed article CIBIL Score Ranges.
There are several benefits of a good CIBIL score. Read on below to learn of the advantages and benefits you can secure with a high CIBIL score.
Cheaper Interest Rates on Loans: One of the most important determinants of how much a loan is going to cost you to repay is the interest rate you get on it. The benefits of a good CIBIL score is that you can avail loans at a lower interest rate, which ultimately makes it cheaper to repay the loan. A lower interest rate brings down the value of your Equated Monthly Installments (EMI) as well, which makes the loan significantly more affordable.
Higher Rewards and More Benefits on Availing Credit Cards: Credit cards are another common form of availing credit in the financial market. Credit cards are a common payment tool today and one of the most popular reasons for using credit cards is the benefits and rewards you get on making purchases through them. With a higher credit score, your credit card will offer you higher rewards and additional benefits on top of the benefits everybody can avail through using a credit card.
Quicker Credit Approval: With a high CIBIL score, you can ensure that your credit application processes are approved quickly. For instance, several lenders offer pre-approved loans for certain individuals who meet their eligibility criteria, which often includes a good credit score. Regardless of whether you are applying for a loan or a credit card, you can rest assured that your loan application will be approved quickly if your credit score is high.
Longer Repayment Tenure for Loans: The benefits of a good CIBIL score also lies in the repayment tenure of loans. If your credit score is high enough for you to be considered creditworthy, you can get longer repayment tenures that allow you to repay your loan comfortably and at your convenience.
Power to Negotiate Terms of Availing Credit: While availing a loan or credit card, you can negotiate the interest rates and other details if you have a high enough credit score. Since lenders are keen to offer credit to individuals with high credit scores, you can have any lender of your choice, which offers you the ability to negotiate the terms of availing credit.
Discount on Miscellaneous Fees and Charges: Loan processing fees are among the most significant charges associated with availing a loan. There are several other miscellaneous fees and charges, which include charges on making repayments late or reducing the amount you pay. If your credit score is good, you can even get a discount on several of the miscellaneous fees and charges associated with availing credit cards and loans.
Higher Limit on Credit Card: Credit card limit refers to the upper limit of the expenditure you can make through your credit card. If your CIBIL score is high, you can avail a higher limit on your credit card and spend more comfortably without worrying about reaching your limit. Since the rewards you earn via spending on credit cards increases with each spend, you can also avail more reward points on your credit card.
As seen above, the benefits of a good CIBIL score include quicker approvals for loans and credit cards. Alternatively, if a potential borrower’s CIBIL score is not good, lenders can opt to refuse to give them credit.
The bank uses the CIBIL score to assess the creditworthiness of an individual. As a result, they also determine the interest rate on credit they are willing to offer the borrower on the credit card. Since the credit score is generated based on an individual’s financial history, banks take a low credit score as proof that the individual might be unable or unwilling to make repayments on time and thus, assign them with a higher interest rate. Thus, it is best to maintain a high credit score owing to the benefits of a good CIBIL score.
There are several factors that influence the CIBIL score and you can keep an eye on them in order to ensure your CIBIL score is high. Making credit repayments on time and maintaining a low debt-to-income ratio are good steps to take to improve your credit score. Even on platforms, such as Bajaj MARKETS, where availing a loan is extremely easy, your credit score needs to be above 600. With that CIBIL score, you can avail a personal loan of up to Rs. 50 Lakhs with an interest rate as low as 10.49% and a flexible repayment tenure.