Introduction
To be eligible for credit products such as loans and credit cards, you must have a positive CIBIL score. Loan officers at banks and other financial institutions assess your credit score, as well as a variety of other considerations such as your earnings, age at the time of loan application, and employment stability, among others.
What is a CIBIL score?
An individual’s CIBIL score is a numerical measure of their capacity to pay back debt. A three-digit number that falls between 300 and 900 represents it. Credit cards and loans might be more advantageous if your credit score is closer to 900. A CIBIL score of 750 or more is preferred by most lenders, including banks and non-banking financing firms (NBFCs).
Here are five aspects regarding your credit score that you probably weren’t aware of before:
You may get a loan despite having a bad credit history.
A credit score of ‘zero’ would be assigned to you if you had never established a credit account with any financial institution. This is because banks would not have any credit history associated with your identity. However, this does not rule out the possibility of taking out a loan. If you have a ‘0’ credit score, banks will not turn you down for a loan; nevertheless, they may need you to present income documentation, an ITR copy for the last two years, and utility bills to analyse your repayment ability before making a loan to you.
Your credit score may be affected if you close an old credit card.
In the short term, closing an old Credit Card account lowers your credit limit, which, in turn, lowers your credit score temporarily. If you have a long-standing credit account, canceling it will completely erase your transaction history; instead of canceling a credit card account, attempt to raise the credit limit on your other credit cards if you already have them. Although the reason for your decision to cancel your account has no impact on your credit score, you should avoid closing a Credit Card account to avoid paying a late loan balance. It is essential to get a closure letter from the financial institution in question.
Getting rid of an unused credit card account can be beneficial in the long run
Any unauthorized use of an unused Credit Card will result in a decrease in the nta Score as well as a loss of money, as is the case with any other credit card. If banks and financial institutions modify the conditions that apply to your credit card, you may be caught off guard, which might harm your credit rating. To avoid further financial hardship, it is recommended that you terminate any unused Credit Card accounts. Depending on your requirements, you may apply for a new card if you have any future demands.
Your credit score might be affected by obtaining a copy of your credit report.
If your credit report is evaluated in the context of a loan application, your credit score will be reduced by a couple of points on average. Credit reporting agencies must review your credit report before they can determine your creditworthiness. Repeatedly applying for loans will only serve to lower your credit score more. While checking your credit score online is known as a soft inquiry, it does not affect your credit score in any way.
High income doesn’t mean high score.
Credit scores reflect how creditworthy you are in terms of borrowing habits and repayment patterns bad credit loans guaranteed approval NZ. In the case of a lack of discipline in your repayment pattern, the quantity of your salary does not affect your credit score.
Employers and insurance firms use credit scores to profile potential employees, which is growing more significantly with each passing day. Maintaining a good credit score may be accomplished by implementing an intelligent debt management strategy that includes developing a suitable repayment plan before taking out a loan.
Conclusion
To maintain an excellent connection with your bank, you must have a high credit score. Getting a loan approved is tough if you don’t have a credit score of at least 750. A candidate’s ability to borrow and purchase large-ticket things via EMI is heavily dependent on their credit score, yet many people don’t understand what it means.
