CIBIL score: You must have often heard how important CIBIL score is, but have you understood it? If your CIBIL score is bad, then you may have to suffer a loss of Rs 19 lakh on a home loan of just Rs 50 lakh. That is why it is said that the CIBIL score should be kept good and it should not be allowed to deteriorate. Let us know its nuances and understand how it can be improved.
How much interest does a CIBIL score of 820 give?
Suppose your CIBIL score is 820 and you take a home loan of Rs 50 lakh for a period of 20 years, which you will get at a rate of about 8.35 percent. In this way, you will pay a total of Rs 1.03 crore including interest of about 53 lakh in 20 years.
If the score is 580, you will pay 19 lakh more!
On the other hand, if your CIBIL score is very low, say 580, then you will get the same loan at a rate of about 10.75 percent. In this way, you will have to pay interest of Rs 71.82 lakh, which is about Rs 18.82 lakh more than before. That means you can lose more than one-third of your total loan just because your CIBIL score is not good.
First know what is CIBIL score?
This is a three digit number or say a score. Its range is from 300 to 900 points. It shows your eligibility to take a loan. This number is decided on the basis of your old loan, credit card bills etc. If you keep paying all your loans and card bills then your CIBIL score keeps improving, whereas if you default then your CIBIL score keeps deteriorating.
What are the benefits of a good CIBIL score
If your CIBIL score is good then it has many benefits. Every bank checks the CIBIL score of a person before giving a loan. In such a case, you can get a loan easily and cheaply. Many times you can even get a pre-approved loan offer and you can also get the facility of instant loan i.e. money coming into the account within a few minutes.
5 disadvantages of having a bad CIBIL score
If the CIBIL score is bad, then you have to bear its loss too. You have to face problems in all the bank related work. Let us know the 5 disadvantages of a bad CIBIL score, which will have a big impact on you.
There will be problem in getting loan
If your CIBIL score is bad, you will have difficulty getting a loan from any bank, small finance bank or NBFC. Banks fear that your CIBIL score is bad, meaning you may default.
will have to pay higher interest rate
Even if some banks agree to give you a loan despite a poor CIBIL score, they will charge a higher interest rate. Actually, they try to manage their risk. They think that even if the person defaults on the last few EMIs, the bank should not incur any loss, so the interest rate is kept high.
You may have to pay higher premium
Many times insurance companies can also demand a higher premium from you if your CIBIL score is poor. Actually, in such a situation, insurance companies feel that you can make more claims, so they can demand a higher premium. Many companies can even refuse to give insurance.
Problem in taking home-car loan
Just like a personal loan, you may face problems in getting a home loan or a car loan. You may even have to pay higher interest. There are also problems in getting a property on lease for business. The company may also ask you to mortgage something in exchange for giving you a loan.
There may be a delay in getting a loan
The bank which agrees to give you a loan will also check your documents thoroughly before giving you the loan. Even if you apply for a gold loan or securities loan, there will be a thorough investigation. Even if you mortgage something, the bank will look at you with suspicion and will do a thorough investigation. All this can take a lot of time, which can lead to a delay in getting your loan.
How does the CIBIL score get spoiled?
There can be many reasons for deteriorating CIBIL score such as not paying EMI on time after taking a loan, settling the loan, not paying credit card on time, not maintaining credit utilization ratio etc. Apart from this, if you have taken a joint loan or you are someone’s loan guarantor and in such a case, if your joint account holder or the borrower for whose loan you are the guarantor makes a mistake, then your CIBIL is also affected adversely.
How to improve CIBIL score?
You will have to do many things to improve your CIBIL score. If you have taken a loan, pay the EMI on time. If you are a credit card user, do not spend more than 30 percent of its maximum limit. Pay the credit card bill on time. Do not take unsecured loans repeatedly and frequently. Be a loan guarantor for someone very thoughtfully. Take the decision of taking a joint loan carefully. If you have settled the loan, get it closed as soon as possible. If you have never taken a loan, take a small loan and repay it on time, so that your credit history can be built.
How much time will it take to improve the credit score?
If your credit score has deteriorated and you want to improve it, then first of all understand that improving the credit score is not a one day job. For this, you have to be a little patient because it improves gradually. It can take at least six months to 1 year to improve your bad credit score. If the score is very low, then it can take even more time to improve. That is why you are advised to maintain the CIBIL score in advance and keep checking it from time to time. So that if it decreases, you can increase it by taking necessary steps in time.
