Benefits of a Good Cibil Score
When we know someone personally, we can make a better decision of whether or not we can trust them. But when we do not know someone well, we choose to rely on facts and figures. This is true for banks as well. They do not know the applicant directly. They do not have knowledge of whether a person is borrowing money for a particular use or are they going to run away with the bank’s money.
In such a situation, a credit score or CIBIL score can prove to be useful. It is a report card of a person’s financial behavior. How they have been in the past with their payments. This helps the bank take a well-informed decision about whether or not they should approve their loan. Having a good CIBIL score has various benefits.
Importance of CIBIL Scores
CIBIL score is very important for any person who wishes to borrow money from a bank or any other financial institution at some point in his or her life. Availing credit is a matter of establishing trust with the financial institution. That can be done only with a good past record. A credit report is exactly that. It has a record of how you have been throughout your financial life with previously borrowed money.
Every lender checks an applicant’s credit score or CIBIL score before approving their application and granting them any kind of credit. Higher the credit score, the chances of getting approved for credit including loans, credit cards and line of credit, are higher.
Benefits of a Good Cibil Score
Quick Loan Approvals
The first thing that any bank or financial institution looks at when you fill out a loan application is your credit score or CIBIL score. It is the first impression that you leave on a potential lender. And not just the first, your CIBIL score is very important for the approval of your loan. If you have a good credit score, you can rest assured that your loan will be approved quickly. However, if your credit score is not good, the lender might shy away from approving your loan and you might have to wait longer to get approval on your loan application.
Lower Interest Rate Offers
When you have a good CIBIL score, you have an edge over people who do not. This gives you the option of negotiation and comparison. A higher CIBIL score means offers from more lenders and better offers from the same lenders. You can also avail other benefits like waiver of the processing fee, late fee and terms of pre-payment if you have an exceptionally good CIBIL score.
Additional Offers
When someone has a good credit score, banks and financial institutions want to retain them as customers as they are a constant source of income (through interest) and there is negligible risk associated with these customers. Hence, they will always offer you benefits. Like waiving a fee off for a credit card or throwing in free loan insurance. These things might help you save on a lot of money in the long run.
Range of Cibil Score and Their Meaning
Score |
Indication |
< 350 |
Poor credit score
|
350-500 |
Moderate credit score
|
500-700 |
Good credit score
|
> 700 |
Excellent credit score
|
-
< 350 (Poor credit score): This means that a person has had many defaults in their previous loans. The risk of giving a loan to a person with a credit score lower than 350 is quite high. The chances of approval for a person falling in this category are negligible. Most banks would not make an offer to such an applicant.
- 350-500 (Moderate credit score): This means that the person has defaulted sometimes in their previous loans. Although these people are better than the previous category, the risk quotient associated with giving them a loan is still very high. The chances of approval for a person falling in this category is quite low.
- 500-700 (Good credit score): This is a decent zone to be in. Having a credit score of 500 is the bare minimum for unsecured loans. Since competition is quite high, you might get a loan at with this credit score but be prepared to pay really comparatively higher interest rates.
- > 700 (Excellent credit score): If you fall in this category and meet the other requirements of the bank you are applying to, you do not have to worry. You will get the best offers. You will also have the capability to negotiate for better interest rate and get offers on credit cards.
