- What is CIBIL?
Credit Information Bureau India Limited Or CIBIL is a credit information agency in India which maintains the credit history of borrowers who apply for personal loans or business loans . CIBIL Score is the numeric summary of credit history. CIR is an individuals credit repayment history over a period of time. In short, it reflects the creditworthiness of the borrower.
- CIBIL score a benchmark for borrower scrutiny.
- When a person applies for a business loan, the CIBIL score helps the lender understand the borrower as to how the borrower has repaid his previous loans, timeliness of repayment, default etc.
- In the absence of collateral, creditworthiness is an important factor for the financial institutions as it shows not just one history but overall records across all Financial Institutions.
- Getting loans from financial institutions, help one fulfil their goals to start their business or other business purposes. However, all these loans have their criteria and interest rates. In this context, the CIBIL score is important to be eligible to avail loans. This also varies across different lenders.
- Along with the salary details, existing debts, place etc a good CIBIL score reflects the responsible behaviour of the borrower and his financial stability.
- CIBIL scores essential to secure loan for Business reasons.
The CIBIL score eligibility varies for different type of business loans . It would also vary for the purpose for which the business loans are required; like if one wants to start a new venture or already has a business but require loans for the purchase of machinery, pay away bills, pay pending salaries etc. So accordingly the lender would judge the CIBIL score and charge a different interest rate.
• Business loans:-If one is applying for a business loans CIBIL score of 700 and above is considered good. For secured business loans, especially for professionals like Doctors, engineers, traders or any other businessmen a score between 600 to 700 is also considered for approval. Apart from Personal Scores, the business scores are also considered for Business loans. It is better to Prequalify with several lenders. They would show the terms of the loan, the quantum of the loan offered based on the CIBIL score and the interest rate offered. Once this comparison is done it would be easy to apply from lenders offering the best deal with the given CIBIL score.
- Tips to improve CIBIL scores.
Before applying for a loan it is necessary to check your CIBIL score. It can be done online so that you already know your chances to qualify for the loan. You can then work on to improve your score if it is less by the following ways to ensure you get the best deal
- Ensure that the bills pending are paid on time.
- Do not apply for any sort of credit cards etc.
- It is also important to verify the credit report for errors.
It is important to know your CIBIL score to avail different business loans as per requirement even before you apply for a loan from Financial Institutions. Very often the proposals for loans are not rejected despite the lower CIBIL Score. However the amount of loan approved will be less. It is therefore important to have a good CIBIL score to avail the business loans depending on the financial requirements.