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A Guide to CIBIL or Credit Score and How To Avail a Loan With Bad Credit Score?

Credit Scores | CIBIL Scores - YeLo

Your financial profile and credit worthiness highly depend on your credit score. A credit score is a 3-digit number that is assigned to your profile after assessing your credit & debit history. This score ranges from 300 to 900, where anything above 750 is termed as perfect. In India, you may find many agencies who calculate or do credit scoring, but among all TransUnion CIBIL is popular and reliable. Hence, a credit score is also referred to as the CIBIL score.

CIBIL or credit score is the first and foremost vital factor that is checked by every financial institution whenever you apply for any kind of credit i.e. a loan or a credit card. It allows the lender to assess your repayment capability. If your score is low, then the chances of accessing the credit will get badly affected and you might not get the same on your favorable terms & conditions or it might get rejected too. Thus, it becomes essential that you know how you can improve your credit score as this not only ensure that you get the required funds but will also allow you to crack a better deal suiting your terms.

Let’s take a look at the significant factors that affect the credit score and various ways using which CIBIL score can be improved. Not only this, even if you have bad credit score how can you avail the loan,

Role of CIBIL Score on Borrowing Loan or Credit

CIBIL score of an individual plays a pivotal role when they apply for any loan or borrow credit from any banks or financial institute as it indicates your financial position and credit worthiness basis of your history. It helps the lenders to assess your current financial condition and risk associated with your profile as a borrower. If you have a low CIBIL score, then it means either you are improperly managing your finances or doesn’t hold the experience to manage your credits. This puts you in a high-risk category that further leads to straightforward rejection by the lender.

Whereas, having a high CIBIL score means that your credit history is positive and you are regularly on your payments. It also shows you hold the best experience to manage diverse credit types. In a nutshell, your credit or CIBIL score is a vital decisive factor that tells whether your loan or credit request will get approved or not.

How Credit or CIBIL Score is calculated?

Four major factors significantly contribute to calculating CIBIL score, they are:

  • Repayment track record
  • Credit portfolio mix
  • Credit utilization ratio
  • Number and amount of existing loans or credit

Each of these components has a weighted associated with it like a repayment track record holds the highest percentage of 30%, next is a credit portfolio mix that is 25%, followed by the credit utilization ratio and number & amount of existing loans or credit that make 25%. There are some other factors too, such as the number of loans applied or applications comprise the 20% balance. If you smartly work on these factors, then it ensures to achieve a good credit score as the risk of error gets minimized.

How One Can Increase Credit or CIBIL Score?

It’s well worth to learn how you can improve your credit score because bad credit score will put you in an unfavorable condition of taking the credit on verse terms or in case of any exigencies you won’t be able to secure credit. So efforts should be made to take such measures that can improve your bad credit score. They are

  • Try to clear all your outstanding dues or debts: If you are not paying your dues on time, then it will negatively affect your credit score. You must clear all your unpaid dues as soon as possible by exercising proper budgeting and financial management.
  • Be regular on your repayments: Ensure not to miss your credit card bill or any EMI, be regular on your repayments as missing on this part can create a deep dip in your CIBIL score.
  • Time to time check your CIBIL report for any errors: If you are consistently paying all your dues or EMIs, then always check your CIBIL report because many times just because of small error scores will significantly get impacted.
  • Try to keep the Credit Utilization Ratio as minimal as possible: You should never use the entire limit of your credit card. Keep it under 35% as this will help you gain more points.

As we have explained how you can improve your credit score, now you may ask “I don’t have a good CIBIL score as of now, so how can I borrow money?” We know all these measures will take time to put in place and you may need cash or money on an urgent basis with bad credit ratings. You can avail of the loan, but you might need to pay a very interest rate, so be careful while applying for a loan and choosing the lending bank or NBFCs.

With Bad Credit Score How To Borrow Money or Secure A Loan?

If you are having a bad credit score, then you need to deploy certain alternate measures like you can take a loan against any collateral or asset or show substantial financial backup. Using collateral for borrowing creates higher chances of approval with a large amount, affordable interest rates, and better repayment terms & conditions. You can easily qualify for loan pledging an asset as collateral even with a lessor bad CIBIL score, as a lending institute holds something as security.

Check your CIBIL score at Yelo and apply for any loan to avail of quick access to funds. With Yelo App, enjoy a hassle-free application process and approval online!

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