Before we get into the why, what is a CIBIL score?
To put in layman’s language, it is nothing but a 3 digit number between 300 to 900 decided by CIBIL, a Credit Information company based on all your credit-related activity within the financial system. This number acts as the first impression for the lender, the higher the score, the better the chances of the loan/credit card being approved. Hence, a CIBIL score is a clear indication to a bank about your financial history on which your credit-worthiness is decided.
Why is it important?
- Easy Availability of Loans – With a good credit score you can be assured that applying for a loan, won’t be a hassle in the future. According to the official CIBIL website, about 90% of loan applicants with CIBIL score greater than 700 often obtain easy approval for loans
- Ability to Negotiate Interest Rates – Higher the CIBIL score lower the interest rates. A good CIBIL score will grant you the power to negotiate; hence you much have a better chance of getting a lower rate of interest on your loans and credit cards.
- Credit Limit Improves – Banks and financial institutions are favourable to individuals with a good or high CIBIL score. Hence over the time, it becomes far easy to get approval for higher limits from the bank or financial institutions.
- Quick Processing of Loans – Be rest assured that the next time you require a home loan, mortgage loan, personal loan, car loan or any other type of loan, the process will be smooth. If the credit score is high, the lender will easily consider the application and move on to evaluate other factors before approving the application
- Best Credit Card Offers – People having a good CIBIL score receive exciting credit card offers from banks. These cards have higher credit limits, privileges, cashback and many more amazing offers.
It is good to learn the factors used to calculate a credit score so you can improve it, if required, and avail the best loan offers on the market. Here is our article which will help you out – 10 Ways to increase your Credit Score