How to Improve CIBIL Score for Better Deal on Business Loan
‘Limits are but meant to be exceeded,’ but definitely not for credit and other synonymous liabilities. Exceeding your credit limit can lead you to trouble and unavoidable emotional stress. Determination of credit limit is necessarily one of the first stages of getting a loan approved.
RBI makes it mandatory for banks and financial institutions to check an applicant’s compliance with Credit Information Bureau Limited. They keep track of individual and business credit records and signals loan applicants in case of potential defaults. Thus CIBIL becomes the basis for personal and business credibility.
‘How do I improve my CIBIL score?’
a) Past reimbursement history:
Lenders need to understand your past credit history reflected through your credit score. Clearing monthly instalments and credit card bills on time help an individual to improve CIBIl score. Defaulters lose CIBIL points thus making it difficult for lenders to put complete trust in them.
b) Credit applications:
Irrespective of whether it’s a business loan or home loan you are applying for, lenders look for the total number of credit applications. If debtors have multiple applications to their name, lenders might find it difficult to sanction him/her a new loan. This lowers their credit scores implying that they are less capable of paying for new liabilities.
c) Credit types:
Lenders prefer applicants who credit history deals in secured loan and thereby reward them with better CIBIL scores. Unsecured loans like personal loans are expensive and are riskier as far as repayment is concerned.
d) Paying attention to credit report:
Inadequate using of credit cards or not informing banks for asymmetry in credit facts might result in lower CIBIL scores. Lack of appropriate transactions hampers personal credibility and lenders find it difficult to trust them with new loans.
In spite of repeated urges to improve one’s CIBIL cores, business enterprises fail to adhere to credibility checks. Resultantly, they experience a fall in productivity due to lack of enough capital. The linkages between a credit report and credit scores often give rise to misinformation that leads borrowers into a mental mess!
4 myths revolving around CIBIL score and your creditworthiness are:
– Does ‘No credit’ necessarily imply better scores?
In order for lenders to have sufficient data to trust loan applicants, they need to have a prior credit history. Zero credit score essentially means that individuals have no credit history which will affect the chances of receiving an approved loan.
– Does a low score necessarily imply no credit?
One of the most crucial parameters determining your credit receive-ability is a proper CIBIL score. While most financial institutions like Bajaj Finserv require a decent CIBIL score to advance new business loans (e.g.), some may even consider your application against other parameters. Although lousy credit inherently attracts more significant interest rate, it is entirely dependent on company-specific credit policies.
– Does checking your CIBIL score hampers your credibility?
Mere checking of your CIBIL details has absolutely no effects on your score. This is regarded as a casual inquiry to your existing score synonymous with checking outstanding balance in credit/debit cards.
– Does your CIBIL score remain unaffected even after closing a credit card?
Think before you consider closing a credit card with a decent credit history. This holds an improved CIBIL score and would prove to be quintessential to your later credit liabilities. business financing application depends on credit length, and thus good credit behavior will enhance chances of being sanctioned your next loan.
Also, old credit cards help maintain lower utilisation rate which will help you influence your CIBIl score. Remember that lenders are looking for your creditworthiness and your past credit history and a prominent CIBIL score does just that.
Bajaj Finserv offers business loans at lower inserts rates depending on your requirement and previous CIBIl scores.
Wish to get your loan sanctioned? Just check your CIBIL score.
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