Before we get into the details of CIBIL scores, there is one thing you must know: a bad CIBIL score can be bad news for your business and life in more ways than one. Of most relevance to a small biz is the fact that a CIBIL score of anything under 500 will get in the way of you being able to procure a biz loan.
All banks are compulsorily required to verify the CIBIL score of applicants to all financial products of credit. This is mandated by the Reserve Bank of India. It is so in order to make it more efficient to establish the creditworthiness of individuals.
A poor CIBIL score for you suggests that you are not creditworthy enough to be given a loan to on account of a poor financial past.
Understand your CIBIL score
A CIBIL report is essentially a statement, track record, and analysis of all the past loans, financial resources, and credit cards activity by an individual. This data helps the lender establish the ‘financial behaviour and financial discipline’ of the individual and evaluate if the loan can or will be repaid.
All CIBIL scores fall between 300 and 900, with 300 being the lowest and 900, the highest degree of creditworthiness. In simpler words, the closer your CIBIL digits are to 900, the more lenders are happy to do business with you. (To know more about CIBIL, visit https://www.CIBIL.com.)
How To Improve Your CIBIL Score:
Happily, with some efforts, an individual with a bad or low CIBIL score can improve his/her rating and become creditworthy again. Here are a few proven ways to obtain and maintain a healthy CIBIL score:
- Clear your credit card balances before the due date
- Pay your EMIs on time
- Exhibit good financial behaviour and discipline.
- Avoid unpaid outstanding amount month-on-month.
- The longer you have a positive credit card repayment history, the better your CIBIL rating score.
- Dispute errors in your credit report immediately on www.CIBIL.com
- Do not apply for new credit without resolving old issues.
- Repeat steps 1 to 7 over and over and over again.
Happy CIBIL scores to you!
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