When an individual applies for a personal loan, he must meet the minimum eligibility criteria required for banks to sanction the personal loan. One of the most important criteria to avail a personal loan is that the individual must have a good CIBIL score. The CIBIL score is a numerical assessment of the person’s repayment history that represents his credit worthiness.
TransUnion CIBIL assigns a 3 digit number usually ranging from 300-900 and the credit score of a person is based on the financial data, banks submit to CIBIL. CIBIL Score is one of the primary parameters that banks consider for approving a loan.
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An individual is assigned with a CIBIL score which generally ranges from 300 to 900. The CIBIL score assigned to a person is generally calculated based on the data/ information that the bank forwards to CIBIL. The information sent by the bank contains the repayment history of the individual on various loans and credit cards.
If the individual has a good repayment track record, then it will reflect positively on the credit score. In case the individual has defaulted on payments or has failed to payback credit card dues, it will severely impact the CIBIL score. It will lower the CIBIL score and would make it difficult for the person to avail a loan or get loans sanctioned.
The banks consider CIBIL score an important parameter for sanctioning your personal loan. The banks do not approve the loan application, if CIBIL score is below a certain number. If the bank approves a loan with a bad or low CIBIL score, than they generally charge a higher rate of interest compared to a loan sanctioned for individuals with a high credit score.
Banks follow strict rules and guidelines while sanctioning a loan and consider the CIBIL as an important parameter for loan approval. The NBFCs do not have such strict regulations and offer personal loan to individuals having low CIBIL score.
Mentioned below are some tips and tricks that will help you improve your CIBIL score in case you have low credit rating:
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