It is important to note that your CIBIL score plays a significant factor when you are applying for any type of loan – whether the loan is a personal one, home loan or an SME loan to start a new business. A higher score increases your chances of being approved and can help you get loans with lower interest rates. If you’re considering taking loans soon improving your credit score must be the priority.
Here are some easy and effective steps you can take to improve your CIBIL score prior to applying for a loan.
Understand Your CIBIL Score
Prior to initiating any changes or making improvements in your financial standing, it’s essential that you are aware of where you currently stand. A CIBIL score typically ranges between 600-900; most lenders would prefer that 750 or greater be attained for most loans. You can check and keep an eye on it online through verification services to assess any effects your actions might be having on it.
Pay Your EMIs and Credit Card Bills on Time
The speed of repayment is the primary aspect in maintaining a high credit score. A single missed EMI can affect your credit score. If you’re looking to apply for an MSME loan or an unsecured commercial loan to an MSME, lenders will initially take a look at your payment history. Be sure to make sure you pay the EMIs or credit card balances on or before the due date.
Keep Your Credit Utilisation Low
A lot of people are prone to using their credit cards until the limit. But, ensuring that your credit utilization ratio is lower than 30% could improve your CIBIL score. This can show the lenders that you’re financially responsible and not too dependent on credit.
Avoid Multiple Loan Applications
When you make a loan application, banks or NBFCs perform a “hard inquiry” on your CIBIL profile. A lot of applications in the span of a few days can decrease your score. For instance, if you are looking into the possibility of an SME loan in Delhi you should first compare lenders and then make a selective application to avoid rejections on multiple occasions.
Maintain a Healthy Mix of Credit
A balance of secured loans (like the home loan) and unsecured loans (like credit cards, or an unsecured business loan for MSME) can positively impact your credit score. If you are relying too heavily on credit that is not secured could reduce your credit score, so you should keep a healthy balance.
Check for Errors in Your CIBIL Report
Sometimes, inaccurate entries like incorrect outstanding amounts or closed loans being listed as active may hurt your score. Be sure to examine your CIBIL report thoroughly and bring an appeal if you spot any mistakes. Making these corrections can immediately boost your score.
Build Credit History If You’re New
If you’re looking to get an SME loan for a new business that is new the lender will want an established credit history. If you don’t have one, approval may be difficult. Start small and use a credit card in a responsible way or apply for a short-term loan and then repay it in a responsible manner to build credit.
Final Thoughts
Making improvements to your CIBIL score requires patience and perseverance however, it’s worthwhile. When you’re requesting personal loans or are planning to apply for an MSME loan, a high score is always an edge.
Loan Guru frequently emphasizes the significance of having an outstanding credit score as being central to faster loan approvals and more favorable loan terms. By managing finances responsibly and living a financially disciplined life you will increase your CIBIL score – thus improving the likelihood that the perfect loan will become available when needed most.
