Importance of CIBIL Credit Score in Indian Loans:
Your CIBIL credit score is an indication of your financial stability and helps lenders decide if you are an individual worth taking a credit risk or not. Basically, a credit score tells the lender what’s the probability of you paying back the loan that you have sought.
Your CIBIL credit score is calculated on your history of credit usage and the way you have handled past payments. If you have been regularly paying off your equated monthly installments (EMIs) and haven’t defaulted you have a higher score. If you use credit in moderation, and don’t go about borrowing beyond your means, you will have a higher score, which in turn improves your credit rating.
Scores between 700 and 800 are considered to be good, but now lenders are enforcing stricter norms. If you have a score below 650, it is most likely that your loan application will be rejected or you will have to pay very high rates of interest. If you have a score below 600, you won’t get a loan.
The lower your CIBIL credit score, the higher is the probability of default. You should access your score at least once in a year so that you get an indication of your credit rating. If you are planning to take a big loan (for example, a home loan) in the next 24 months, then it is advisable that you check your score every six months so that you can improve it and increase your chances of getting a loan.
What will affect your Credit Score?
If you have no credit history, creditors may treat you the same way as if you have had bad credit. This might seem unfair, but the rationale behind is that you have not established a history to show that payments are made over an extended period of time.
Score parameters: The credit score of every person is different and is an evidence to varied credit behavior. The credit score is not a permanent one. It is extremely dynamic and keeps changing as a person changes his financial behavior.