Looking to apply for a loan? Everything ready from having a proper set of documents to adequate income for paying the EMIs, which extend to Equated Monthly Installments? So you apply at a bank thinking that you would pass the approval test with flying colours. But comes the rude shock from the lender which rejects your application, leaving you flummoxed as to what went wrong.
When you enquired with the bank, it cited a reason of low credit score resulting from payment default on your previous loans. So if you had checked CIBIL score status, you could at least have got an idea of your credit standings. It may not, though, assure you of the loan application approval. So, you should Check CIBIL Score before applying for a loan.
Why Do Lenders Check CIBIL Score Before Saying Yes to Your Loan Application?
TransUnion CIBIL, formerly known as Credit Information Bureau (India) Limited, is an agency that prepares a credit report of individuals by checking the repayment track of individuals who are servicing loans or credit cards. The repayment history gives an insight of your ability to repay the debt on time.
So if you are defaulting constantly on your loan repayment, chances are that CIBIL score will come down rapidly and make your case for a future loan weaker. On the other hand, servicing the debt smoothly boosts your credit profile and thus becomes easy to get the lender’s nod for a loan.
How to Check Your CIBIL Score?
You can check your CIBIL score on the official website of the credit rating agency. You would need to register first by furnishing several personal and professional details, as well as loan or credit card records. Subsequent to registering the details, you will be able to create a login to access your CIBIL score.
So just enter your User ID and the password to see the score, which remains in the range of 300-900. Anything above 750 is considered good for a loan or credit card.
Check CIBIL Score by PAN Card
You can check your CIBIL score by entering the details as written on PAN Card. You need to write your Name, Date of Birth and PAN to view your credit score at CIBIL. In addition, you need to enter the details of residence before submitting your request at CIBIL’s website.
How Does CIBIL Score Calculation Take Place?
Banks and other financial institutions subscribe for membership of CIBIL to get an idea of a prospective borrower’s creditworthiness. So whatever credit-related activities you do are reported to CIBIL on a monthly basis. The credit data features repayment of each loan and credit card of a customer.
It even includes late payments and defaults, along with other details such as credit limit on the card, interest rate and the status of all loans even if they are written off, closed or settled. CIBIL analyzes such complex data before calculating the credit score.
How to Improve CIBIL Score?
So if your CIBIL score is on the lower side, you can get that up by paying the credit card bills or loan EMIs on time. Doing this for a fair length of time will help improve your credit score. It would be better to budget your expenditure in a way to enable a smooth repayment of the loan EMIs or card dues. If possible, make a full payment of the card dues instead of revolving the credit by paying the minimum due only.
This due amount is calculated at 5% of the total outstanding balance in a particular billing cycle. So if you pay minimum due only, charges like interest and taxes will add to the bill.
What Not Do While Applying for a Loan?
Yes, you should check CIBIL score before applying for a loan to get an idea of your credit history. But checking it repeatedly will create a negative impression among the lenders who would view you as credit hungry. And when such an impression develops, the credit score goes down and makes your loan case a lot weaker. So avoid doing that and pay loan or credit card dues on time to boost your credit profile.