CIBIL Score plays important role in getting loan. 300-549 is poor CIBIL score, 550-649 is Fair CIBIL score, 650-749 is Good CIBIL score, 750-900 is Excellent CIBIL score. Settlement of a loan with interest waiver always lowers your CIBIL score dangerously. If you look at the numbers more carefully, 80% of loans have been issued to people with score of more than 750 and 90% of loans to people with CIBIL score of 700 or more. The thing to note is there has been loans sanctioned (less than 10%) for poor scores too but it would be very difficult and you may have to do a lot of extra formalities like finding a guarantor, etc.
80% of loans have been issued to people with score of more than 750
It is normal for a bank to reject your loan if you have opted for a loan settlement. If your credit score is negatively impacted by a recent loan settlement, there are a few ways through which you can improve your score and ensure that you do not face any issues in your future loan applications.Get a secured loan or a secured credit card and start making timely payments on those. This will help you build your credit score again, and build your creditworthiness.
Waived off loan impacts your CIBIL Score and decreases the probability getting loan approved
To get high CIBIL Score, if possible try to remit the remaining amount in your education loan (ie the amount which was written off) in your bank and try to request the branch manager to issue you a full clearance letter. After this data is updated in the bank system, your CIBIL score would improve, mostly after a month.
For improving your credit score, only way is to avail more loans and pay them regularly
In case you do not have a credit card, you should apply for one. By using a card frequently and properly, you will be able to enhance your credit score and loan approval chances. If you have poor CIBIL score, chances are low that you would get a credit card or any other loan. But you can apply for credit cards backed by fixed deposits. This can help you show your regular repayments and hence improve credit history.
If case lower CIBIL Score, get secure Credit Card backed by fixed deposits
Get the secure credit card with 80% of FD amount and utilize the consume credit card for spending. Invest 2.5X of your monthly expense in the fixed deposit and get the secure credit card. Keep the below points while using your secure credit card.
- In case your monthly expense is 20,000 rupees,
- Get Fixed deposit for 50,000 rupees,
- Get the secure credit card for 80% of FD amount = 40,000 limit.
- Utilize max 50% of credit limit = 20,000 rupees
Be regular with your EMIs and Credit card payments :
As stated earlier regular payment history on loans is most important contributor to your credit score, so a regular payment helps improve your score. So from now on make sure you do not miss a single payment. You might want to use auto-debit facilities provided by banks to pay bills and EMIs.
Keep your credit card utilisation low :
It helps to spend much lower than your available credit limit on credit cards. Keep your utilisation low and do not ever cross your credit limit on your credit card. In case you are high spender, you can also apply to increase the credit limit of your card. Another work around is pay as you spend – as this would keep the utilisation lower.
Stay Away from Credit Repair Company:
If someone claims that they can instantly improve your credit score – its not possible until its related to rectification of error! So in most cases it does not help to engage a credit repair company. However, you can contact debt counselling centers in case you are in over-debt scenario.
There is no method to improve your credit score overnight.
Also as your duration of credit history increases it impacts the credit score positively. So it makes sense to get a credit card early and use it carefully to build a good credit score. It will help when you actually want to borrow for big purchases like home or car.
Get a credit card early and use it carefully to build a good credit score
How to get Loan with Low CIBIL Score :
In todays time getting loan without CIBIL score is difficult but not impossible. You can do the following:
- Borrow jointly with someone who has high credit score.
- Get a guarantor for your loan
- Borrow against mortgaging your asset like house, car, shares, mutual funds or gold
- Try alternate sources – borrow from Peer to Peer platforms or new age Apps who do not refer to CIBIL score
Credit Card Against FD :
All banks would check your credit score before issuing credit card. However if you have poor CIBIL score you can opt for credit cards backed by fixed deposits. Here the bank will offer credit card with up to 90% of your fixed deposit.
- State Bank of India – SBI Unnati
- ICICI Bank – ICICI Instant Platinum
- Bank of Baroda – Assure card
- Axis Bank – Insta Easy Credit Card