CIBIL scores reflect your creditworthiness based on your credit history. Banks use this score as one of the key factors in their decision-making process at the time of assessing your loan application.
While a high CIBIL score shows that you have a good credit history and are likely to repay your loans on time, banks also consider other factors such as your income, current loan obligations, and the specific loan product you are applying for. If you meet the bank’s criteria in these areas, having a high CIBIL score can improve your chances of loan approval.
Does it guarantee loan approval?
It’s significant to note that loan approval decisions depend on the bank’s internal policies and risk assessment processes. An acceptable credit score varies from bank to bank.
ALSO READ: Faced a financial setback? Here are 6 steps to follow to improve your CIBIL score
A high score generally ranges above 700 to 900.
While a high credit score is seen positively by banks, it doesn’t guarantee loan approval on its own.
| Score Range | What does it indicate |
| 700-900 | Excellent |
| 650-699 | Good |
| 550-649 | Fair |
| 300-549 | Low |
Frequently Asked Questions:
Is it important to diversify your credit mix?
It is advisable to have a mix of different types of credit accounts, such as credit cards, loans, and collaterals, which can positively impact your credit score.
Does applying for new loan impact the credit score?
Each time you apply for credit, it triggers a hard inquiry that can temporarily lower your credit score. So, it is advisable to limit new credit applications, particularly if you’re planning to take out a significant loan soon.
ALSO READ: How to improve your CIBIL score using gifted money? Here are 3 ways
Does being a guarantor impact your debt burden?
Being a guarantor doesn’t raise the debt burden but is seen as a potential debt. However, the lenders can consider the guaranteed amount while determining borrower’s creditworthiness.
How can you improve the credit score?
You can work on improving your credit score by making timely payments, reducing outstanding debt, and maintaining a healthy credit utilisation ratio (CUR) before applying for a car loan.
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Published: 08 May 2024, 07:32 PM IST