6 Advantages of Having a Good CIBIL Score

A high credit score usually comes with the following key benefits for the applicant:

1. Higher chances of approval: A high credit score indicates responsible credit behaviour, and a lower risk of default for the lender which typically increases your chances of being approved for a loan or a credit card

2. Lower interest rates: A good credit score may also help you avail credit like a personal loan, home loan, or credit card on comparatively lower rates of interest from the lender

3. Increased access to pre-approved loans: A high credit score may also often increase your chances of accessing pre-approved loans and credit card offers. These offers can give you quicker access to credit as they usually involve minimal documentation and shorter approval times

4. Easier access to premium credit cards: Before approving a credit card application, one of the first things that lenders consider is the credit score of the applicant. As a result, credit card companies are more inclined to provide such applicants access to premium credit cards if they fulfill other requirements that feature better rewards in the form of reward points, cashback, privileged services, etc.

5. Approval for higher loan amount/credit card limit: A high credit score can also increase your chances of getting higher limits on your loans and credit cards approved. This is because a higher score usually indicates a lower risk of default owing to your responsible credit behaviour

6. Possibility of approval for longer tenure loans: A longer tenure usually involves a higher degree of risk for the lender. However, a good credit score may help you avail longer repayment tenure on your loan than those with a lower score. When a loan is repaid over a long period, it results in smaller EMIs, a lower monthly credit burden, and may help you manage your monthly expenses in a better way.

Also Read: How to Download your Credit Report Online

CIBIL score is a three-digit numeric summary of your credit history that ranges between 300 and 900. A score above 750 is generally considered a good CIBIL score. A good/high credit score may help you avail credit more easily and on better terms as it indicates a lower degree of risk for the lender.

However, CIBIL score is just one of the credit scores generated by TransUnion CIBIL and your credit score may vary among different credit bureaus. Moreover, different lenders may consider a different credit score such as the one generated by Equifax, Experian, or CRIF Highmark when evaluating your credit application.

A credit score is one of the major determinants that help lenders gauge your creditworthiness based on your past credit behaviour. A good credit score indicates a higher creditworthiness and a lower degree of risk for the lender.

Here are a few key factors that influence your credit score:

Additionally, some other factors that can influence your credit score include:

• Credit utilization ratio: It is the ratio of the amount of credit availed to your total available credit limit. A high credit utilization ratio may indicate a higher dependence on credit, a higher repayment burden in the future, and thus, a lower creditworthiness. Whereas, a lower credit utilization ratio hints at the opposite
• Credit mix: A balanced mix of secured and unsecured credit can have a favourable impact on your credit score. It indicates your ability to manage credit across loan types and lending institutions effectively and can have a favourable impact on your credit score. However, no lender will reject your application just because you haven’t handled multiple forms of credit in the past
• Length of credit history: The length of credit history or credit age is another important factor that affects your credit score. Having a long credit history with good borrowing and a clean repayment track record usually indicates responsible credit management and a history of financial stability which has a favourable impact on your credit score

Several factors impact your credit score, including your repayment history, credit mix, credit utilization ratio, age of credit history, etc. Following are a few key ways that can help you improve your credit score: 

In case you have a low score, you can also opt for credit advisory services by credit experts from Paisabazaar and rebuild your credit score to increase your creditworthiness in the future.

If you have never taken a loan in the past or had a credit card, you won’t have a credit history. Not having a credit score makes it difficult for lenders to gauge your creditworthiness and the risk involved in lending money to you. This, in turn, may make it difficult for you to secure credit when the need arises.

Thus, if you don’t have a credit history or a credit score, here are a few key ways that can help you slowly work towards building your credit score:

• Get a secured credit card or an entry-level credit card: You can try and avail an entry-level credit card that has relaxed approval criteria. Moreover, you can try and apply for the same with the bank that you have an existing relationship with such as a savings or a salary account. You can also try and get a secured credit card such as a Step UP credit card that is backed up by a fixed deposit and thus, easier to avail. Moreover, use it responsibly and make payments on time to build a positive credit history over time
• Opt for a small loan: To build up your credit history and improve your creditworthiness, you can also avail a small loan such as a consumer durable loan or a credit line. These small loan amounts usually come with shorter tenures and repaying them on time may help you build up your credit history and credit score
• Become a co-applicant: Becoming a co-applicant for a loan with a person who has a good credit history is another way that can help you establish your credit history and gradually build up your credit score.

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