Your CIBIL score indicates your reimbursement and represents your credibility. It is dependent on different factors such as credit history, promptness of repayments by loans and credit card bills, current loan applications and refusals, frequency of application for loans and other factors. This three-digit number gives you an indication of your creditworthiness and financial health, so that you can repay your debts in due course. This allows them to measure the risks of providing credit cards and loans to borrowers, assess the chances of debt recovery and determine if applications for loans and credit cards are accepted.Not only does a poor score minimise the chances of qualifying for a loan and credit card, but also credit would be provided at a high interest rate or a low loan rate, and other unfavourable terms. A strong CIBIL score on the other hand enables fast loan authorisations and other advantages.
IMPACT OF CIBIL SCORE
Let’s have a look at good, bad and middling CIBIL scores and how they affect loan approvals.
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CIBIL score between 750 and 900:
The chance to secure a loan is best with an excellent CIBIL score in this bracket. Furthermore, the process of loan approval is typically swift and hassle-free. A score within this range is a favourable indicator of the borrower's creditworthiness, allowing lenders view it as high quality. It also gives lenders some confidence that the loan amount will be repaid in due course, also allowing borrowers to bargain on the loan amount and interest rate and to determine the future.
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CIBIL score between 700 and 749:
Most credit in this bracket are referred to as a 'good' CIBIL score. Those with a score in this range have a reasonably good chance of securing their borrowing application approval. In spite of a reliable CIBIL ranking, however, the risk is not as high as 750 higher. There are also relatively less chances of securing loan approvals. Borrower's CIBIL score must be increased to increase their loan approval chances.
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CIBIL score between 650 and 699:
This set of CIBIL scores are known as average credit scores that indicate that borrower reimbursement was either not too good or poor. However, improved credit behaviour, which is very high, can be done to decrease the chances of loan denials. With such mild CIBIL ratings, a high interest rate or a high premium or no additional gain, the possibility of a loan with favourable terms and conditions is poor. If your credit card instalments and debits are charged exclusively during the due date, your CIBIL score will not further decrease.
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CIBIL score between 550 and 649:
There is no hope that a CIBIL loan would be secured in that bracket because it entails high risks to lenders. Such findings indicate that the borrower's financial distress has regularly defaulted in credit card payments and loan repayments. This minimises your trust in the creditor to collect the refunds within the agreed due date. Certain lenders may provide a loan by demanding a guarantor for risk reduction. In the event that the borrower cannot clear the debt, lenders will rely on the borrower for the necessary refunds. Borrowers have to stop applying for loans or credit cards and stop using credit cards till they have repaid the entire outstanding amount pending against them to improve their CIBIL scores.
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CIBIL scores of 550 and below:
A CIBIL score lower than 550, which all lenders consider a bad performance, decreases the chances of obtaining a loan, as it indicates poor health. The loan is highly likely to be denied. The lender may be forced to opt for a loan for collateral such as FDs, gold printing, shares or cash, in addition to a small sum and a loan with a high rates of interest. The chance to secure a loan with a CIBIL rating lower than 550 is considered to be extremely negative since the score can be increased only after years of responsible credit reimbursement.