Quick Link
Muthoot Blog Banner
BLOG

Stay

Updated at

All Times

IS A GOOD CIBIL SCORE REQUIRED FOR A GOLD LOAN?

A gold loan is a form of financial assistance provided by the lenders with the expectation that the payments will be made on time. A good credit score reflects how well you have managed your credit payments. As a result, if you are wondering if a gold loan or credit affects your credit score in general, the answer is yes, it does play an important role in your credit score. If you are able to repay your gold loan on time, your credit score will be increased. Negligence, on the other hand, may harm your credit score, and as a result, your ability to take a loan in the near future may be at risk. If you want the credit facility to be available to you at all times, you must treat it with care. So, it is mandatory for you to check your minimum CIBIL score required for a gold loan.

Importance of CIBIL Score in Gold Loan

In order to process any kind of loan, the RBI has made it mandatory to check the CIBIL score. Even if the CIBIL score is low, gold assets operate as a security and protection for the bank in gold loans.

When you are in need of funds, you apply to many institutions for a personal loan, resulting in needless inquiries on your credit record. At that time, no bank will be able to provide you with a personal loan since those inquiries would reduce your CIBIL score. However, if you apply for a gold loan at the same time, the bank will not allow you to go away dissatisfied or empty-handed. As a result, since you are putting your gold as collateral for the loan, you provide the bank with assurance that you will repay the loan on time.

However, this does not imply you should disregard your CIBIL Score since it is important in obtaining other financial products. On the other hand, a gold loan might help you improve your CIBIL score

How to Improve CIBIL Score

If you are thinking about taking a gold loan online or from a particular branch, it is essential that you have a good credit score as it affects your application for a loan. The following are the ways to improve your credit score for a gold loan:

  • 1. Repay on time

The gold loan, like any other type of loan, has a fixed interest rate and term. Regular EMI payments are required if you wish to develop credit. The lender reports to credit bureaus any payments made on the gold loan. Regularly paying EMIs is a type of excellent financial progress in a borrower's life. Ensure that you pay your EMIs (Equated Monthly Installments) on or before the due date. Payment of EMIs on time will begin to have a favourable influence on your score. Maintain your discipline, and you will eventually end up with an excellent CIBIL score and a lot more open doors.

  • 2. Check your CIBIL score report

It is very important that you keep a check on your CIBIL score report as it will keep you aware of the two things that are important for a good credit score. The first will be the loan or credit card with defaults or late payments that have lowered your credit score. The second thing it will tell you is the information on your credit report. This aids in credit score repair because if you find any unfavourable information on the report, such as defaults or payment delays, you can always approach the bank and CIBIL to get the problem remedied.

  • 3. Maintain a healthy credit mix

There is no denying that having a good mix of unsecured loans like credit cards and personal loans and secured loans like a home loan is always a smart move. As an individual with a higher number of secured loans, you are always preferred by the lenders, as well as you get a good credit score from the bureaus. It is advised that you try re-paying the unsecured loans first rather than the secured ones in order to maintain a healthy mix.

  • 4. Keep a tab on how frequently or how many loans you take

Another reason you should avoid asking for loans and credit cards too frequently is that each time you apply for credit, the bank will request your credit report from CIBIL, and the query will be reflected in the report. A bank inquiry might potentially cause your score to drop after each request for your report. This means you suffer from two disadvantages: the first is that you exhibit credit-hungry behaviour, and the second is that your credit score suffers even though you have every intention and capacity of repaying the loan/card on time.

  • 5. Limit your credit utilization

One way to improve your credit score is by reducing the limit of utilization on your credit card and avoiding using it to its maximum limit. You should budget for up to 30% to 50% of your monthly expenses. When you spend more than 50% of your credit card limit, your credit utilization ratio rises, lowering your credit score. Additionally, maxing up your credit card implies you will struggle with budgeting and will find it difficult to repay your credit card account in full and on schedule. This is what is causing your grades to fall.

Now that you know that the gold loan impacts your credit score as multiple inquiries can result in lowering your credit score whereas, regular repayments can boost it. When you take out a gold loan with Muthoot Finance, you are guaranteed 100% client satisfaction. Muthoot Finance provides comprehensive convenience as well as an exceptional experience, with swift loan disbursals and low-interest rates. Many customers looking for gold loan providers place their trust in us since we have the largest gold loan portfolio in the country.

Subscribe to our newsletter

Close Icon

help us serve you better