A good CIBIL score is the key to getting loan approval quickly
CIBIL™ score is the key to getting loan approval
A CIBIL™ score helps in the quick approval of loans. A CIBIL™ score of 750+ is considered great by lenders while approving a loan. A high score means that your past financial behavior has been impeccable. A good past credit history helps improve the CIBIL™ score which in turn helps in the fast approval of loans.
What is a Good CIBIL™ score for Fast Approval of Loans?
CIBIL™ score is a three-digit number that lenders consider an important metric for the loan approval process. The CIBIL™ score ranges between 300-900. The higher the score is, the better it is for the applicant. A CIBIL™ score of 750+ is considered very good for faster approval of loans. The below table shows the importance of different levels of CIBIL™ score.
|What it means
|1) The best score you can get
|2) Makes the applicant highly creditworthy
|3) Measure of good credit history
|4) Attracts lenders
|5) Lenders will give attractive interest rates
|1) Good score
|2) Attractive creditworthiness
|3) Respectable credit history
|4) Almost all lenders available
|1) Lower score
|2) Not all lenders are available
|3) Will not get attractive offers or interest rates
|4) Need improvement in the profile
|Less than 550
|1) Poor score
|2) Most lenders are unavailable
|3) Needs to improve the score to obtain any loan
Importance of CIBIL™ score in the Loan Approval Process
- Select the loan you want to apply for.
- Fill in the loan application form.
- Submit the loan application form with the required documents.
- The lender will take a look at the credentials.
- They will check the CIBIL™ score.
- Applicants with a CIBIL™ score above 750 are considered highly creditworthy. They will be offered an attractive interest rate.
- Applicants with a CIBIL™ score between 700-750 will be considered creditworthy and most lenders would be willing to approve a loan. A good interest rate will be offered to them.
- Applicants with a CIBIL™ score between 550-750 would be offered a higher rate of interest. Few lenders would be willing to approve the loan as the risk is higher.
- Applicants with a CIBIL™ score of less than 550 will find it hard to get a loan. Most lenders will reject the loan. Those who will approve will offer a very high rate of interest.
What do Lenders Check in the Credit Report
- Payment history is the number one information that lenders like to check in the credit report. Payment history talks about any overdue amounts or defaults. Days past due or DPD tells about this metric in the credit report.
- Debt-to-income ratio is a metric that lenders check before approving a loan. The debt-to-income ratio tells how much of the applicant’s income is being used to pay off their debts. The higher the ratio is, the less likely is the loan approval. Ideally, a debt-to-income ratio of less than 50% is desired by a lender.
- Personal profiles are also carefully scrutinized by lenders. Most banks will have a list of pre-approved applicants. In this case, the pre-approved loan is based on a good credit score and credit behavior.
- Lenders look for written-off cases in the Account Status section of your report.
CIBIL™ score and its Effect on the Loan Approval Process
CIBIL™ score has an impact on the loan approval process for various types of loans. Let us understand how different types of loan approval processes are linked to CIBIL™ score.
- Auto Loan Approval Process – To get your auto loan approved faster, a CIBIL™ score of 700+ is desired. However, if your CIBIL™ score is below 700, you will still get an auto loan but with a higher interest rate. The approval process also might take longer. This increases your total outflow in the long run.
- Personal Loan Approval Process – Personal loans are usually pre-approved loans. Lenders offer personal loans to their existing customers based on a number of factors, CIBIL™ score being a very important one. The higher the score is, the faster the approval process and the lower the interest rate will be.
- Home Loan Approval Process – For a home loan, a CIBIL™ score of 750 – 900 is considered as a good score for a quick approval and disbursal process. An applicant with a high CIBIL™ score will be offered a higher home loan with better interest rates. They may also be offered rebates for certain fees and charges.
How to Improve your CIBIL™ score?
- Pay dues on time – Pay your credit card bills, EMIs, and other outstanding on time to ensure a good CIBIL™ score.
- Low credit utilization ratio – Maintain an ideal below 30% credit utilization ratio to ensure a good CIBIL™ score.
- Credit mix – A good credit mix between secured and unsecured loans helps in maintaining a CIBIL™ score. Lenders consider this as the applicant’s ability to handle all types of credit.
- Check CIBIL™ report – You must check your CIBIL™ report regularly to know your CIBIL™ score. It is also important to know if there are any errors in the report which are resulting in a low CIBIL™ score. These errors should be reported to the credit bureau for quick action and correction.
- Restricting loan inquiries – Too many loan inquiries will result in a low CIBIL™ score. Lenders consider too many inquiries as the need to pay a lot of debt. This implies that any additional debt will be difficult to pay for the applicant. Hence, limit your inquiries for new credit cards or loans.
A high CIBIL™ score helps aid a faster loan approval process. Usually, a score of 750+ is considered very good by lenders. Lenders would be willing to offer pre-approved loans at an attractive interest rate with minimal documentation if the applicant’s CIBIL™ score is above 750. Maintaining a good CIBIL™ score is highly important if you want the loan to be approved quickly.