How Does a Personal Loan Impact Your CIBIL Score?
Credit score is a crucial eligibility criterion aids in availing a personal loan without any hassle. A high credit rating also offers this option to negotiate its rate of interest with the lending organisation.
At the same time, a personal loan can harm your CIBIL score as well. You must learn about the score in detail before understanding how loans impact it.
What is The CIBIL Score?
CIBIL score is a three-digit number ranging on a scale of 300 to 900. The score provided by CIBIL is accepted by the majority of financial institutions owing to the former’s 2,400+ members. you can check CIBIL score online.
The organisation determines your credit rating after ascertaining the data in your Credit Information Report (CIR). The CIR contains information related to credits you have availed.
Mismanagement or improper handling of credits will impact your credit report which, in turn, will lower your CIBIL rating.
Impact of Personal Loans in CIBIL Score
Lending institutions prefer customers with a 750+ CIBIL score for a personal loan. The only time when your score takes a beating is when you fail to pay the EMIs after availing the loan. Defaulting on your EMIs results in the lowering of your CIBIL score.
Late payment and the number of days an EMI is outstanding can have severe impacts in your CIBIL rating. Hence, you must always make sure to clear all dues on time.
Nowadays, many lenders offer personal loan calculator online to help borrowers assess their loan EMIs beforehand and determine if they can make those repayments timely. Another way is to automate the EMIs payments. Two methods you can opt for include:
- Standing instruction
A standing instruction connects your savings account with your loan account. This facility enables your loan provider to deduct the EMIs from your account automatically on a specific date. Do note that both of these accounts need to be in the same financial institution.
2. ECS
Electronic Clearance Service (ECS) enables you to connect your savings and your loan account, which is located with another financial institution. An ECS mandate automatically debits your account to pay for the loan EMIs.
NBFCs like Bajaj Finserv provide with these facilities to ensure hassle-free payments. The company offers personal loans up to Rs. 25 Lakh with tenors ranging from 12–60 months. You can also avail competitive personal loan interest rates.
Bajaj Finserv provides with pre-approved offers as well that help save more time when availing loans by simplifying the procedure. Pre-approved offers are not only available with personal loans but also with home loans, business loans, and an array of other financial products. Check your pre-approved offers by providing only your name and phone number.
Must Read: A Quick Insight Into Reducing And Flat Personal Loan Interest Rates
Other Impacts On Your Credit Score:
Other than personal loans, here are some factors that can impact CIBIL score:
- Paying the minimum amount due in your credit card
You get the option to pay either the total amount due or the minimum payable amount within the due date.
While total amount is the full outstanding amount, minimum amount is a specific percentage of it. This rate differs with credit card companies and may sometimes include interest as well.
Paying the total amount increases your credit score while going for the minimum amount has the opposite effect.
2. Utilising too much of your credit limit
Credit limit is the maximum amount that you can borrow with your credit card. Your CIBIL score will decrease if you utilise too much of your credit limit. Hence, it is best to keep credit utilisation under 30%.
3. Applying for too many credits
Financial institutions perform credit enquiries whenever you apply for a loan or a credit card. These enquires are made to check your CIBIL score and credit report. Your score also lowers with every such enquiry. So, make sure not to apply for multiple credit cards or loans at a time or too frequently.
Other than the above, an application’s rejection can hurt your credit score. Hence, make sure you fulfil all the eligibility criteria and conditions before applying for a personal loan.
Must Read: Know How Lenders Check Your Online Personal Loan Eligibility
