What are the Negative Effects of a Low CIBIL Score?

cibil

Your credit score is an important metric that lenders use to evaluate your financial standing. It is a 3-digit figure ranging between 300 and 900 that summarises your creditworthiness and the one issued by TransUnion CIBIL, a credit rating agency, is known as a CIBIL score. As most lenders check your CIBIL score, it is advisable to have a score of 750 or more to enhance your chances of getting a loan or a credit card request approved. However, if you have a track record riddled with defaults, you will have a low CIBIL score and this can be detrimental in terms of access to credit.

Read on to know how a low CIBIL score can affect your loan application negatively. 

The prospects of loan rejection are real

Since credit scores serve as a barometer of your creditworthiness, a low CIBIL score is indicative of defaults in payment in the past. Typically scores below 550 are considered to be bad and are given to those who have defaulted in the past and have dues pending. Scores below 650 also indicate different levels of risk and to avoid this, lenders may turn down applications. In essence, if you have a low CIBIL score, convincing your lender that you will be able to make timely repayments through the tenor will be a task.

Lenders extend credit at higher rates of interest 

Obtaining a loan with a low CIBIL score is a possibility; however, you will not be able to secure financing on easy terms. Typically, you lose leverage to negotiate and lenders increase the rate of interest, so as to bring down the risks of lending involved. On the flip side, high CIBIL scores reassure lenders and the closer you get to 750, the more competitive you can expect the rate of interest to be.

You lose access to promotional offers

If you have a low CIBIL score, you have to forego access to a range of promotional offers that lenders extend to customers from time to time, be it seasonal discounts or even pre-approved offers. 

Now that you are aware of what is a CIBIL score and how a low CIBIL score can hamper you financially, read on to know how you can improve your CIBIL score. 

How to improve a CIBIL score? 

Here are 3 sure-fire ways to boost your CIBIL score.

  • Make payments on time

The best way to improve your credit score is to pay your current EMIs and credit card bills on time. To ensure that you do not delay or default on payments, you can set reminders or even automate payments by way of standing instructions.

  • Do not overuse your credit card

If you are a credit card holder, it is advisable that you limit your use of credit. Your credit utilisation ratio is the measure of the amount of credit used to the amount available and keeping it below 30% indicates that you aren’t credit hungry. This is good for your CIBIL score.

  • Maintain a mix of credit

Having a well-balanced mix of credit can help you improve your credit score. It implies that you are adept at managing both secured and unsecured finance.

While the above points help you improve a low CIBIL score, the first step for improvement is conducting a CIBIL score check. Free CIBIL score figures are provided via the official website and once you know where you stand, you can chalk out a plan. 

What’s great is that upon possessing an ideal score, you get easy access to a host of financial offerings such as the collateral-free Bajaj Finserv Personal Loan. Here, you get funding up to Rs.25 lakh on simple eligibility terms and benefit from features such as a flexible 60-month repayment tenor alongside quick loan approval and disbursal. In fact, you can simply check your pre-approved offer for access to instant finance through a customised deal! 

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