A loan is the simplest way to acquire money to pay off your debts or buy something new. When you take a loan from a bank or a financial institution, your loan details and payment history are submitted to the Credit Information Bureau (India) Ltd or CIBIL. It is a credit information company that provides a credit score to evaluate future loan approvals.
NBFCs like Bajaj Finserv offer a variety of loans for your financial needs with the option of online approvals and online account access.
CIBIL Transunion Score 2.0 is an updated version of the credit score that is designed to better identify and classify new borrowers with a credit history of less than 6 months. It categorises them into risky and non-risky and enables lenders to hasten the approval process.
Version 2.0 also has a new credit scoring system. In the previous version, borrowers with less than 6 months of credit history were given a score of 0. With the new credit score system, you are graded on a scale of 1 – 5, with 1 representing a high risk of default and 5 representing a low risk. This way you can be considered for loans even if you have a short credit history.
If you have a credit history of more than 6 months, you will be scored according to the old system. However, with the new evaluation parameters, it’s possible that you might get a lower score than you had earlier.
The Importance of a Good Credit Score
A good credit score will get you a better loan and faster approval. A credit score is a numerical representation of your financial credibility. Whether it’s buying a home, starting a business, applying for higher studies, or pursuing personal financial goals, a good credit score will make sure you get whatever loan you’re seeking.
With a decent credit score, you can opt for the Home Loan offered by Bajaj Finserv. They provide features like part pre-payment facility and nil foreclosure charges.
Improving Your Credit Score
According to CIBIL, a score between 700 and 900 is considered good and, therefore, will get you a better shot at the loan. If you make the right financial moves, you can easily maintain a respectable credit score. Here, we look at a few tips to improve CIBIL score.
- Timely payments: The biggest setback to your credit score is a bad repayment history. Late payments or missed payments are updated in your credit history and will lead to a drop in your score. Try your best to pay all your bills on time.
- Do not be credit-hungry: If your credit utilization is high, lenders will refrain from providing you a loan. Ideally, you don’t need more than 2 credit cards. Increase their limit and cancel any additional cards you may have.
- Utilize credit cards sparingly: Another factor that reinforces your credit dependency is utilizing your credit card to the limit. Move to a cash-only or debit payment to reduce expenses on your card.
- Pay your debts: Debts, small or large, also play a significant role in your credit score. Pay off your debts as soon as possible.
- Avoid unnecessary expenditure: Is a second car really necessary? Do you really need a bigger home? Make sure you understand the difference between a necessity and a privilege.
Every transaction gets recorded and reflects in your credit report. Now that you know how to improve your credit score, ensure you follow them diligently to avoid any negative impact on your finances.
This improved version of the CIBIL credit score aims to increase credit penetration and financial inclusion in the country. In fact, it’s a better indicator of risky customers and has been designed keeping the Indian market and consumers in mind. With CIBIL 2.0, lenders can effectively sift out unreliable loan seekers, something which doesn’t just keep the market healthy for them, but also for future borrowers.