TransUnion CIBIL is the oldest credit information and insight company operating in India. It collects data from credit institutions across India including banks and non-banking financial companies (NBFCs). This data is subsequently used to prepare Credit Information Report (CIR) i.e. CIBIL report and calculate CIBIL score/CIBIL rank for individual/corporate borrowers. In case of individual borrowers, a high CIBIL score is essential to be approved for a car loan as well as any other type of loan. The following sections discuss key aspects regarding how to achieve and maintain a good CIBIL score for a car loan.
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What does a good CIBIL Score for Car Loan mean?
Credit score is a 3 digit number which is part of an individual’s CIBIL report. Your CIBIL report, also called the Credit Information Report, is generated based on the handling of loans and credit cards in the past. Your CIBIL score sums up how well you have previously handled credit by assigning a number between 300 and 900. A high CIBIL score is closer to 900 such as 750 or higher. Also simply put, higher your score, higher are your chances of getting a car loan approved, whether for purchase of a new car or a used car.
But a good credit score will not only improve your chances of being approved for a car loan, but can also provide you better access to special offers. Such offers can include 100% car financing i.e. zero down payment, lower than usual processing fees, special low interest rates, etc.
While a good CIBIL score is definitely desirable to avail a car loan easily, a comparatively low CIBIL score, such as 650 or below does not automatically make you ineligible for a car loan. However, a low score can typically results in car loan offers that have a higher interest rate or a higher down payment requirement.
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How to Apply for a Car Loan with CIBIL Score?
Following is the step-by-step procedure to apply for a car loan:
Step 1: Fill out the car loan application form on Paisabazaar.com
Step 2: Subsequently, you will see a list of eligible car loan offers arranged as per the chances of approval.
Step 3: Select the most suitable loan offer or call Paisabazaar customer care for assistance.
Step 4: Get instant conditional e-approval as soon as you submit your online car loan application. As part of the application process, we will automatically check your CIBIL score to determine if it is suitable for availing the car loan of your choice and subsequently forward your application to your chosen lender.
How does CIBIL Score affect Car Loan?
While your CIBIL Score is only one of the factors that determines your eligibility for a car loan, it does play a key role in availing the loan. The following are the key ways in which a good CIBIL score helps avail a car loan easily:
- Car Loan Approval: CIBIL score as well as other credit score offered by other credit bureaus acts as a direct measure of your creditworthiness. In other words, it helps the lenders evaluate your suitability to receive future loans such as car loans based on your repayment behaviour in the past. Hence higher the CIBIL score, higher are the chances of getting your car loan approved.
- Car Loan Interest Rate: Your credit score may also affect the interest rate at which you will get the car loan. A high CIBIL score which is closer to 900, such as 750 and above reflects greater financial responsibility, and thus results in a lower interest rate.
- Car Loan Amount: A good repayment history may also allow you to avail a bigger car loan amount such as one with zero down payment i.e. 100% financing. On the other hand, a low CIBIL score of 600 and below reduces your creditworthiness hence may not allow you to get the desired loan amount.
A strong credit score can help in getting the desired loan amount. Check Score
Can I Get a Car Loan with a Low CIBIL Score or No Credit History?
While having a good credit score improves your chances of getting a car loan approved, a comparatively credit score or having no credit history (i.e. no prior loans/credit cards) does not automatically make you ineligible for a car loan. Please note that no credit history (denoted by NH/NA on a credit report) typically means that you have never had any loan or credit card in the past. In such cases, lenders typically consider the following factors in order to determine your eligibility for a car loan:
- Income: If you can prove that you have a stable source of income that can support the payment of monthly loan installments, your chances of approval will increase. Typically salary slips, Form 16, profit and loss statement, etc. need to be submitted with the lender as income proof documents.
- Loan Amount: A low credit score is indicative of higher risk of default for the car loan as compared to an applicant with a high score. Thus, you may decide to request a lower car loan amount and choose a higher down payment option to increase your chances of car loan approval.
- Co-applicant/ Guarantor: Apply with a co-applicant who has a better credit score and a more stable source of income. You may also consider getting a guarantor, so that the lender can trust not just your repayment capability but also your guarantor’s when approving the loan.
Tips to Improve your Eligibility for a Car Loan
You should take the following steps to improve your chances of getting a high CIBIL score to get your car loan application approved:
- Always pay your loan EMIs and credit card dues on time to maintain a good credit history and hence a good credit score
- Maintain a healthy mix of credit by keeping a balance between the quantum of secured loans (such as home loan, car loan, etc.) and unsecured loans (such as personal loan, credit card, etc). High dependence on unsecured loans is typically viewed negatively by lenders
- Monitor your CIBIL report periodically and look for errors. For example, you may have paid off a loan, but the report doesn’t reflect the same. In case of errors, you should get the error rectified by raise an online CIBIL dispute
- Never use a large proportion of the total credit available to you. Ideally, your credit utilization ratio should be below 30%
- Avoid multiple loan applications at the same time, as it may portray you as credit hungry which may result in multiple hard enquiries of your CIBIL report. This can ultimately result in a lower credit score
- Do not allow your fixed obligations, i.e., ongoing loan EMIs and credit card dues to form a large part of your monthly income
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Click to know your credit score @ zero fee. This Way
How to Check your CIBIL Score for Car Loan Online for Free?
You can check your CIBIL report and score online for free through Paisabazaar.com, additionally, you can also seek the help of Paisabazaar’s credit advisory service to improve your score and enhance your eligibility for a car loan in the future. Follow the subsequent steps to check your credit score for free online:
Step 1: Visit the free CIBIL Score page on Paisabazaar.com
Step 2: Fill out the CIBIL score application form online
Step 3: Finally, click the “Get Free Credit Report” button to get your CIBIL credit report and score with monthly updates absolutely free.
Frequently Asked Questions (FAQs)
Q1. What is a CIBIL score?
Ans. A CIBIL score is a 3-digit numerical summary of your credit report. It varies between 300 and 900. The score serves as a measure of your creditworthiness. Higher your score i.e. closer you are to 900, higher are the chances of getting a loan application approved.
Q2. What is considered a good CIBIL score for getting a car loan?
Ans. A CIBIL score close to 900, typically 750 and above is generally considered a good CIBIL score for getting a car loan.
Q3. How can I improve my credit score?
Ans. You can improve your credit score by:
- Making timely payment of loan EMIs and credit card dues,
- Maintaining a low credit utilization ratio, and
- Avoiding multiple loan applications.
You can also seek the assistance of credit advisory services from Paisabazaar to improve and maintain a high credit score.
Q4. Can I get a car loan with a low CIBIL score?
Ans. Yes, you can get a car loan with a low CIBIL score. However, you should prove to the lender that you have a stable source of income and you may also have to arrange for a guarantor or settle for a lower loan amount.
Q5. Can I check my CIBIL score for free on the TransUnion CIBIL website?
Ans. Yes. You can access your CIBIL report which contains your CIBIL score for free once a year directly from TransUnion CIBIL. However, Paisabazaar.com offers free CIBIL reports with monthly updates i.e. up to 12 free CIBIL reports a year at zero cost.
Q6. What should I do, if there is an error in my CIBIL report?
Ans. You should raise an online dispute with CIBIL when there is a error in your report. Login to myCIBIL and navigate to Credit Reports > Dispute Center > Dispute an Item. This process is known as raising a CIBIL dispute.
Q7. Is CIBIL score also important for a car loan intended to purchase a used car?
Ans. Lenders tend to use your CIBIL score as the first check to assess your creditworthiness, and hence CIBIL score is important for both new and used car loan.
Q8. Can CIBIL score affect the interest rate of car loan?
Ans. Yes, CIBIL score can affect the interest rate of car loan. Generally, a high credit score translates to a lower preferential interest rate on a car loan.
Q9. How can I check the status of a dispute raised online at CIBIL?
Ans. CIBIL sends weekly email notifications to convey the status of the dispute.
Q10. How does CIBIL prepare credit report and score?
Ans. TransUnion CIBIL prepares your credit report and score on the basis of the data collected from its member credit institutions, which include banks and NBFCs all over India.