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| December 31, 2021


A personal loan is one of the most common borrowing alternatives for those looking for rapid access to cash for a range of personal reasons. However, because this loan is collateral-free, lenders must verify the applicant's credibility. In this regard, one of the first things that potential lenders consider is the loan applicant's credit score.

What is CIBIL Score?

A CIBIL score is a three-digit figure between 300 and 900. It assesses your capacity to repay the borrowed funds. A score of 750-900 is considered the best. To have greater access to credit products such as credit cards and loans, your score should be closer to 900. A good CIBIL score indicates that you have been a responsible borrower.

A high CIBIL score shows greater credit worthiness as a result of responsible prior credit behaviour and a solid payback track record. As a result, the lender's default risk is minimized. Though credit score is not the only criterion used to determine a person's eligibility to obtain a personal loan, it is one of the first factors lenders consider when reviewing loan applications. A lack of credit history or a low credit score raises concerns about a person's ability to repay since the lender cannot assess the risk or considers the applicant to be a higher-risk borrower.

What are the benefits of a high CIBIL score?

  • Lower Rate of Interest

Lenders in the nation have begun to price loans based on the risk profile of the applicants. And as a result, applicants with a high credit score receive reduced interest rates, allowing cheaper interest rates on house loans for individuals with a good credit score.

This is significant since even a half-percentage-point increase in interest rates may have an impact on your EMIs and, as a result, your finances. Loans with low-interest rates are thus one of the benefits of a 900 credit score or a high credit score.

  • Loan with a longer-term

If you have a strong credit score, you can get a loan with a longer repayment period. Choosing a long-term loan will result in reduced monthly payments. This will assist you to decrease your repayment load, allowing you to return the loan amount on schedule.

You may check your CIBIL score online by visiting the official CIBIL website and submitting an online application form. You might have to pay a little fee for this service. You must understand how to check your CIBIL score because it is a major deciding factor in loan application acceptance.

  • Faster Loan/Credit Card Approval

You can get a credit card with a larger limit if you have the best CIBIL score. However, be certain that you do not overuse your credit card and that you pay your credit card payments on time. If you do not comply, your credit score may suffer in the long term.

If you have a good credit score, you will be eligible for additional bonuses and incentives on your credit card in addition to a high credit limit.

  • Avoid several loan inquiries/applications at the same time:

Avoid submitting numerous loan applications and enquiries to various lenders at the same time. It portrays you as credit-hungry and raises the number of hard queries on your credit record, which lowers your score.

  • Avoid Debt Settlement:

You should always strive to pay off your obligations in full and only consider settling as a last resort. While debt settlement may decrease the weight of debt, it also signals an unwillingness to repay your obligations, which may have a bad influence on your credit score and future credit acceptance prospects.



CIBIL Score Advantages

Following are the advantages of a high CIBIL score:

  • Loans with lower interest rates

  • Cards that provide more advantages and incentives

  • Pre-approved loans are available.

  • Loans with a longer-term

  • Credit applications are approved more quickly

  • Power in negotiations

  • A reduction in loan processing fees and other costs

  • Increased credit card limit

How to Improve a Low CIBIL Score for a Personal Loan?

The information in your credit report is numerically represented in your credit score. Your repayment history, credit mix, credit usage ratio, age of credit history, and other such characteristics often impact the eligibility of personal loans for CIBIL defaulters. The following are some suggestions to help you increase your credit score:

  • Regular Payment

One of the most significant aspects in calculating your CIBIL score for free is by ratings of your payment history, and having a lengthy history of on-time payments may help you obtain good credit scores. To do so, make sure you don't miss any loan or credit card payments by more than 29 days—payments that are more than 30 days late might be reported to credit bureaus and damage your credit ratings.

Setting up automated payments for the minimal amount required will assist you to avoid skipping a payment (provided you don't overdraft your bank account). If you're having difficulties paying a payment, contact your credit card company immediately away to explore hardship alternatives.

  • Aim for less credit utilization

Credit usage is the percentage of your credit limit that you are currently utilizing. It is the second most important element in FICO credit score computations, after payment history.

The most straightforward approach to keep your credit usage under control is to pay off your credit card bills in full each month. If you are unable to do so on a consistent basis, a reasonable rule of thumb is to maintain your total outstanding debt at 30% or less of your overall credit limit. Then you may concentrate on reducing it to 10% or less, which is regarded optimal for boosting your CIBIL score for a loan.

The significance of good CIBIL scores cannot be overstated. Having a good CIBIL score simplifies your life and gives you greater access to financial products and services.  You may now apply for a personal loan with Muthoot Finance where we offer personal loans suited to customers’ specific needs. Visit your nearest Muthoot Finance branch to know more.

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