What is a CIBIL Score and How Does It Affect Loan Eligibility?

Have you ever heard about the CIBIL score and wondered what yours is? You must have heard about it while applying for long-term or short-term loans online.

The CIBIL score is a numerical value. It ranges from 300 to 900 that determines an individual's creditworthiness. This score is determined by credit records and performance as reported by credit reference companies. 

What factors determine your CIBIL score? How can you maintain an accurate report? And most importantly, what is considered a good CIBIL score for loan approval?

These are questions that anyone who wants to be financially secure and get better loan conditions needs to understand.

CIBIL score is a major criterion adopted by lenders when approving loans. A good score means that you will get your loan approved quickly and at a low interest rate, while a bad score will reduce your chances of getting a loan.

What Factors Determine Your CIBIL Score?

• Payment History

Your CIBIL score is based on how you repay your loans. Not making payments on time or skipping some will harm your score because it shows that you are not a responsible borrower.

• Credit utilization ratio
  

This is the ratio of the total credit you currently use to the total credit available to you. A high credit utilisation ratio means you rely on credit, which is bad for your score. Ideally, it is better to keep this ratio below 30%.

• Credit mix 

A good credit utilization ratio is one in which you have both secured loans, such as home or car loans, and unsecured loans, such as personal loans or credit cards, which will help to improve your score.

• Length of credit history 

Ideally, the longer the credit history, the better. It provides lenders with a better understanding of your financial habits in the long run.

• Recent credit inquiries 

This means that applying for several loans or credit cards quickly will lower your score. Every question relates to your report and can be interpreted as a huge sign of a financial problem.

How Can You Dispute Errors on Your CIBIL Report?

• Common errors found in CIBIL reports

1. Incorrect personal details
2. Any loans or credit cards that are listed that you did not apply for
3. Differences in the payment records
4. Inaccurate information

• Steps to check your CIBIL report for discrepancies

1. You can get your CIBIL report through the official website.
2. Check all the sections, especially the accounts section and the repayment history.

• Process to dispute inaccuracies with CIBIL

1. Go to the CIBIL Dispute Resolution page.
2. Go to the website and fill out a dispute form pointing out the mistakes.
3. Produce documents as evidence.

• Timelines for resolution and what to expect

After you have filed your dispute, CIBIL takes about 30 days to address the issue. They will check the details with the relevant lender and make the necessary changes.

What Is Considered a Good CIBIL Score for Loan Approval?

A good CIBIL score improves your loan approval probability and defines the loan terms the lenders provide.

• Ideal CIBIL score range for different types of loans

1. 750-900: Excellent – Quick approvals and favourable terms.
2. 650-749: Good – Eligible for loans, but terms may vary.
3. 550-649: Fair – Limited loan options with higher interest rates.
4. Below 550: Poor – High chances of rejection.

• How lenders assess the score for approval

Banks and other lenders use your score to determine whether or not you are creditworthy. A high score means you are trustworthy and thus a low risk to the lender. On the other hand, a low score results in loan rejection or high interest rates being charged.

• Impact of a low CIBIL score on loan terms and interest rates

With a low score, even if you secure a loan, the terms are often unfavourable. This means higher interest rates, extra charges, or short credit terms.

Conclusion

Keeping the CIBIL score in good shape is essential to enjoy financial facilities like quick loans and better interest rates.

Tips for Improving Your CIBIL Score:

• Make sure that you pay all your EMIs and credit card bills on time.
• Credit utilization should be less than 30% for each credit card that you have.
• Do not apply for credit that you do not need.
• Check your CIBIL report frequently and challenge adverse entries immediately.

A good score in CIBIL not only helps you get a loan but also gives you more options. For those searching for quick financial fixes, mPokket is a leading instant loan app. Whether you are looking for a cash loan online or a trustworthy source for short-term loans online, our services are a lifesaver. We do not provide too much emphasis on credit scores and help you get loans.

Start managing your finances today to create a better financial tomorrow!

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