Personal Loan To Improve CIBIL Score
A good CIBIL score becomes an integral deciding factor when applying for a personal loan . Having a high credit score of 750 or above boosts your chances of personal loan approval significantly at a considerably low-interest rate.
However, if your CIBIL score isn’t good, you can improve it in many ways. To learn how to increase your CIBIL score is to take the first step towards obtaining a personal loan. From paying off your debts on time to having a good credit mix, you can learn how to boost your credit score in numerous possible ways.
Here, at Piramal Finance, we allow you to improve your credit score with a personal loan. Not sure how to improve your credit score with a personal loan? Check this guide we prepared for you.
How To Improve Credit Scores with Personal Loans?
To learn how to improve your credit score fast with a personal loan, follow these tips curated by the experts at Piramal Finance:
- Always pay your loan EMIs and credit card bills on time. Paying them in full and on time can significantly boost your credit score and represent you as a responsible borrower.
- Keep track of your credit report using our free credit report checker. This will help you locate and address errors and potential fraudulent usage (if any). Rectifying such mistakes will boost your CIBIL score.
- Avoid applying for loans from multiple loan providers as it increases the number of hard inquiries on your credit report, thus lowering your credit score.
- Don’t go for debt settlement, as it can impact your credit score. Instead, try to repay all your outstanding debts completely. A settlement should only be an option when you’re financially broke.
What Is A CIBIL Score?
A CIBIL score is computed by one of the four credit bureaus in India – TransUnion CIBIL. Piramal Finance considers it a crucial factor while determining the loan applicants’ creditworthiness. It is a three-digit overview of your credit records and history that is derived after assessing your credit report. A CIBIL score typically ranges between 300 and 900. The higher the CIBIL score (750 or above), the faster you get approval.
Check Credit Report Free
At Piramal Finance, you can check your credit report for free with monthly updates. We allow our customers to check, monitor, track, analyze, and build their scores by giving them free access to their credit reports.
Our tailored credit advisory solutions enable customers to comprehend their credit reports for free and improve their credit scores accordingly. With Piramal Finance, get a comprehensive overview of your credit report, including vidya and analysis. So, boost your creditworthiness by improving your credit score!
What Factors Are Responsible for A Low Credit Score?
- Missing Loan Installments
- According to reports from Financial Express, a 30-day delay in your EMI repayment can reduce your credit score by 100 points. Thus, missing loan installments can be one of the major reasons behind a low CIBIL score.
- Coming Too Close To The Limit On Credit Cards
- If you come too close to your credit card limit and use almost 90% of it, your credit utilization ratio will fall. Such credit utilization will put you at high risk of defaulting and negatively impact your credit report.
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Not Paying Credit Cards Back On Time
- Not paying credit card bills back on time can adversely impact your credit report and, thus, lower your credit score. Delayed or missed payments show that you are careless and unresponsive about EMI repayments.
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Not Paying Credit Cards In Full
- Paying only the minimum amount due for your credit cards will get you trapped in a debt cycle. If you keep rolling the debt, significant interest will compound on your outstanding credit card balance. This will poorly reflect in your credit report and reduce your credit score.
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Not Having Any Credit At All
- Your credit score is also affected when you have several credit cards but no loans or credit. Your CIBIL score will get severely impacted if you have plenty of credit cards but not even one loan account.
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Too Many Rejected Applications For Loans/Credit Cards
- When applying for a personal loan or credit card, your credit report gets checked. This process is termed a hard inquiry. It’s most likely that many of the applications will get rejected, thus lowering your credit score.
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Settling credit cards
- Settlements are generally a less expensive way of paying the creditor an amount that will erase the credit by closing the credit card or loan account. However, having a settled status on a credit card or loan account has a significant negative impact on your credit score.
Benefits Of Taking A Personal Loan To Improve Your Credit Score
- Clear Existing High-Interest Debts:
- You may have to bear high penalty charges and high interest for any existing, past, or unpaid loan dues that you haven’t paid or have missed paying. In such a situation, taking a personal loan at a lower interest rate to pay off all existing debts can eliminate your financial burden while improving your credit score.
- Consolidation of Debts:
- A single personal loan from Piramal Finance is all you need to pay off and consolidate all your existing debts. Debt consolidation reduces the total interest you pay for all your debts. With only one personal loan to repay back, repayment on time in the form of EMIs in one place is the simplest thing for you. Thus, you won’t miss any repayments and eventually improve your credit score.
Frequently asked questions
At Piramal Finance, we give equal weightage to all eligibility criteria, including credit score, monthly income, credit repayment history, age, and others. However, having a high credit score (750 or above) gives you an edge over other applicants
While a CIBIL score between 300 and 549 is considered poor, a CIBIL score between 720 and 750 is deemed good. However, having a credit score between 800 and 900 means you have hit the exceptional range, and you're eligible for the lowest interest rates, best lending terms, and more.
A CIBIL score is a crucial consideration made by loan providers while assessing your application for a personal loan. The lower the CIBIL score, the lower your chances of personal loan approval and vice versa.
That's because your CIBIL score represents your creditworthiness, your repayment capability, and your commitment to meet repayment terms. A higher credit score makes you eligible for personal loans of higher amounts at lower interest rates.
If you’re wondering how to improve your CIBIL score immediately to avail of a personal loan, follow these few tips:
- Make sure you pay all EMIs for any existing loans on time.
- Opt for e-mandate to automate your EMI and bill payments to avoid missing deadlines.
- Avoid taking excessive credit from the market at once.
To obtain a personal loan from Piramal Finance, even with a low CIBIL score, you need to do the following things:
- Provide income documents that prove you earn enough to support EMI payments against the loan amount you applied for.
- Avoid being credit hungry and apply for a lower personal loan amount.
- Boost your chances of loan approval by securing a guarantor or applying with a co-applicant.
- If there’s any mistake or error in your credit report, rectify it.
- Send a formal request to us to consider your application with an NH or NA in your credit report.
When applying for a personal loan to raise your credit score, submit the following documents:
Address Proof: Utility Bills, Aadhaar card, PAN card, Voter ID card, Ration card
ID Proof: Driving license, Aadhaar card, Voter ID card, PAN card
Income Proof:
- For salaried individuals: Salary slip for the last three months, Form 16, and bank account statement for the last six months
- For self-employed individuals: ITR file for the last two years, PL statement and Balance sheet for the previous two years, GST certification.
Although there are many fees and charges associated with a personal loan, the major ones are listed below:
- Processing fees: During the loan application processing phase, we bear some expenses associated with administration. This is what we term as ‘processing charges’ and deduct from your loan amount.
- Late payment fees: These are penalty charges we incur from the borrowers when they fail to pay the EMIs on time.
- Foreclosure or prepayment fees: When you pay off the outstanding loan amount before the pre-decided tenure, Piramal Finance as a loan provider faces a loss. To cover up for that loss, we charge a minimum foreclosure or prepayment fee.