Know how the CIBIL score can help you save money

As the Reserve Bank of India (RBI) is raising its key rates to control high inflation, banks are also following suit and raising interest rates on various loans. Borrowers are now looking for ways to get cheaper loans. One way for borrowers to get cheaper loans is to maintain a good CIBIL score. The score shows the creditworthiness of a person. Here’s how a good CIBIL score can get you a cheaper loan and how to maintain a good score:

CIBIL score and loan approvals

Banks approve loans or issue credit cards only to those with a good CIBIL score. The CIBIL report contains the score and other credit details. Banks after reviewing the CIBIL report can check the repayment discipline of the borrower. It also gives an insight into the person’s credit risk profile, depending on which banks decide whether or not to grant a loan.

Rohit Garg, CEO and co-founder of microcredit platform SmartCoin, said, “Credit scores are booming in the market, from highly reliable credit bureaus to floating offers from payment platforms. There are different ways to get approved for a loan including stable job, viable income, credit history, your relationship with the bank and most importantly – CIBIL score, which will help you get a loan easily and effortlessly. Your report will be easily qualified if you have a good score with comments under certain sections. »

About 79% of loans are granted to people who have a CIBIL score of 750 and above. Having a higher CIBIL score not only allows the applicant to easily obtain loans, but also obtains the loan at a relatively lower interest rate, according to a report by TransUnion CIBIL.

A banking expert said: “The interest rate on loans is not fixed for all borrowers. Banks offer a range of interest rates and the rate is based on the risk profile of the borrowers. One of the criteria for a lower interest rate for borrowers is their credit rating. For example, a bank may offer an interest rate on home loans between 7.40 and 7.70%, depending on various factors, including the risk profile of the borrower.

Last week, the RBI’s monetary policy committee unanimously decided to raise the repo rate by 50 basis points to 4.90% with a focus on sheltering withdrawal. He prompted lenders to raise interest rates on loans. Several lenders, including ICICI Bank, HDFC and Punjab National Bank, have raised their interest rates on home loans.

What is the CIBIL score?

Ranging from 300 to 900, the CIBIL score is a three-digit number. The higher your score, the better. Generally, a score above 750 is considered good where the chances of loan approval become higher. It is a digital summary of your credit history and a reflection of your credit profile, showing your credit behavior as a borrower. It also reveals if you have defaulted on a refund in the past. This score gives an overall indication of your creditworthiness and history.

How can you maintain a good CIBIL score?

Do not delay the reimbursement of contributions: if you want to maintain a good CIBIL score, the first thing to do is to be strict with reimbursements: pay on time and never delay. The repayment of loans or credit card dues has a very significant impact on your CIBIL score.

Don’t always keep your credit card limit depleted: It’s a good idea to get a credit card with a higher upper limit, if you’re having trouble staying within the card’s existing limit. The credit utilization rate must be limited to 30% to have a good CIBIL score.

Diversified loan products: It is best to diversify the loan portfolio with a good mix of secured and unsecured debt in order to achieve a high CIBIL score. A credit card is unsecured debt, while a home or car loan is secured debt.

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Garland K. Long