Credit bureaus such as CIBIL, Equifax, and HighMark provide you a credit score. This credit score will be used by potential lenders to determine your creditworthiness. It is regarded as one of the most important deciding factors by bankers and lenders.
This is because your credit score will reveal whether you have been a good or bad borrower to you and your lender.
As an applicant, the higher your credit score, the more creditworthy borrower you are. This means you’ll be able to pay your expenses on schedule. As a result, the risk of default for lenders that lend to you is lower. In the flip manner, a poor credit score makes you more likely to default.
The CIBIL score is quite important.
The CIBIL, or credit score, is crucial for every borrower. If you need a loan, lenders will only consider your application if you have an exceptional credit score. If your CIBIL account is positive with good scores, you may be able to acquire a lower interest rate on debts. However, if your credit score is low, you can work to improve it before asking for a loan.
When you apply for a loan, you are borrowing money from a lender or a bank with the intention of returning it within a set time frame. It’s a statistical method for calculating your odds of repaying the money you borrowed from the bank.
When applying for a loan, what are the most significant components of your credit report to consider?
Payment Tracking:
It’s in the Account area, and it’s split into two sections: DPD (Due Days Past) and payment month and year. The number of days you’ve been late with your payments is referred to as DPD. If your DPD over the last three years is ‘000,’ it means you have a good likelihood of being approved for a loan.
Accounts Payable:
The “Account” column also shows your current balances, which reflect the size of your debt. Based on your total current balances on numerous loans, a loan provider determines if you can handle the additional EMIs.
Duration and credit mix
This is responsible for 25% of your credit score. On your credit report, there are two types of loans: secured and unsecured. A home loan is a secured loan, whereas a credit card or personal loan is an unsecured loan. Lenders like borrowers who have a combination of both forms of loans. If you’ve used any of them for a long time and paid your bills on time, your credit score will improve.
Unspecified
There are certain criteria, such as hard investigation, that are included. If you apply for too many loans, lenders will check your credit score frequently.
Accounts that have recently been created:
An increase in the number of loans and credit cards you’ve been authorized for could indicate that you’ve accumulated more debt. Your credit score will suffer if you get authorized for a significant number of loans and credit cards in a short period of time.
Final Thoughts
Make it a habit to check your CIBIL report on a regular basis by visiting their website. Checking your CIBIL report is beneficial for you as it will help you to locate errors in the report and improve your CIBIL score. You should always check your report in a patient way and be careful about the same. You can get the report for free once a year. Your credit score, as well as whether or not you have defaulted on any loans or best credit cards in India obligations, are all included in the report. By thoroughly checking the facts, you can determine why your CIBIL score is low.
