Well, most of you would agree that a credit score is popularly used to check whether you qualify for a requested loan or not. That's it!
However, not many know that your CIBIL Score isn't only used for loan approvals. Instead, numerous other aspects are there that involve the checking of CIBIL Score.
Before proceeding, you must know what a CIBIL score is and what value is considered a good credit score. CIBIL score is a three-digit numeric value that is given to every borrower based on various financing factors like credit accounts, repayment pattern, overdue amount, credit usage, etc. Every individual has a different CIBIL score depending upon the credit score methods.
Most people who use credit instruments have accurate CIBIL scores as their credit facilities better them the credit bureau about their financial journey. On the other hand, people with no loan or credit card make it tough for the credit bureau to get loan approval as they don't have a credit history.
A CIBIL score between 700 and 900 is considered as good; that offers quick loan approval alongside numerous other financial benefits. If you have a credit score within this range, you have the potential to get a high loan amount at a lower interest rate.
Now, below are the other areas beyond loans where your CIBIL Score is evaluated.
Higher Negotiation Power: With a good credit score, you get the power to negotiate for a lower interest rate on various credit facilities. If you don't get any interest rate benefits, you may get associated offers that other companies are already offering their customers.
Borrowers with a bad CIBIL score can't negotiate on any credit facility. Instead, they are supplemented with higher interest rates and requirements for collateral (in some cases).
Get High Credit Limit: Depending upon your current CIBIL Score, you can request your lender for a higher credit limit on your credit card. Nowadays, most private banks reach customers with high credit scores and offer higher credit limits alongside exciting offers. A bad credit score holder will have a restricted credit limit that too added with a high-interest rate.
Quick Approval for Rental Home: Getting a rental property is tough in today's era. A big reason behind getting the right apartment is a credit check. Yes! Several homeowners prefer checking your credit score before finalizing a tenant deal with you. Credit check has also become a part of the tenant screen process. A bad credit score can lower your chances of getting your dream apartment.
Get Better Car Insurance Policy: Getting third-party insurance is mandatory. However, most car owners add Own Damage to secure their vehicle against accidental damages. Interestingly, your credit score plays a vital role in getting a good insurance policy. High credit score holders get higher insurance premiums at a low cost. Unfortunately, applicants with bad CIBIL fail to get a handsome insurance premium with the same amount.
Get Phone with No Security Deposit: Numerous telecom service providers provide you phone on contract. You can choose the option pay-as-you-go plan and get a costly phone for your daily use. Interestingly, you need to pay a security deposit until you showcase your good credit. People with high credit risk must deposit security before getting a phone. On the other hand, good credit holders can get a costly phone without paying a security deposit. They can get it just by signing the contract.
Save Security Deposits on Utilities: Most of you won't believe it, but security deposits on your utility usage can range from $100 to $200, depending upon your consumption. This makes a significant impact on your monthly expenses. Security deposits are a must whenever you relocate or resettle in a new location. A good credit score helps you get the utilities without security deposits.
Rights to Brag: You are only eligible to brag about various opportunities only if you have a good credit score. Unfortunately, you have to work hard and earn a good credit score to achieve exciting benefits.
That said, it's clear that the use of a good credit score isn't limited to loan approvals only. Now, all borrowers with bad credit profiles are unfortunate to get the above-listed benefit. This doesn't mean you can't enjoy these benefits.
Some ways can help you improve your credit score:
Set Reminder for Disciplined Payments: Your outstanding debt and how you pay matters a lot in calculating your credit score. You must always keep track of your outstanding debts and how you repay them on time. If you have multiple EMIs, set a reminder for them to ensure you pay them on time and save yourself from unexpected penalties. Your reminder can help you from getting credit damages.
Use Credit Card Smartly: Credit cards are easy to get; hence you shouldn't miss out on getting one for yourself. However, big trouble starts when you start using it inappropriately. You should definitely take a credit card and use it to build your credit history. Smart usage of credit cards gives you the confidence to increase your credit strength and build a good credit score.
Alter Your Credit Limit: How much you consume from your credit limit matters a lot in creating a strong and healthy credit score. Your utilization ratio should be less than 40% of the credit limit. Yet, if you consume a higher limit, you are considered under the 'credit hungry' category, which impacts your credit report. If you have a high spent count, it's better to increase your credit limit to maintain a lower consumption ratio. You can enquire your lender about the upgrade limit and proceed if possible.
Prefer Taking Long Term Loan: Yes! A loan plays a significant role in creating your credit history strong and building a base for a good credit score. If possible, you can get a home loan, car loan, or any other credit facility for a long-term duration. This will give you lower EMI along with the benefit of a good credit profile. However, with a long-term loan comes to the responsibility of paying your EMI on time.
Don't Take Hefty Debts in Single Go: To build your credit score, taking a loan is recommended. However, it's never suggested to apply for multiple debts to your account. Taking multiple loans can add mental and financial stress, resulting in high outstanding amounts. With time, your outstanding dues will hike, which will bring you into an alert situation where it will become tough to clear them. Hence, prefer taking small loans that are easy to repay and build your credit score.
Make a Credit Mix: It's false if you think that relying only on credit card usage can help you improve your credit score. There are different types of credit facilities that you must add to your bucket. Creating a mix is highly recommended to make a good credit score. Personal loans, home loans, vehicle loans, credit cards, etc., are the common credit options you can choose to make a good start. However, prefer taking calculative debts that you can easily repay.
Avoid Making Multiple Credit Requests: Many times, borrowers make requests from multiple lenders to check whether they qualify for the loan amount or not. Often they make requests to check their credit report. These two options bring you into the limelight and directly affect your CIBIL score. Hence, you should avoid making multiple inquiries from different banks.
If needed, you can reach one lender and let them make the decision. If denied, they can help you with the right lender who can give you desired loan without requesting your CIBIL report from the credit bureau.
If you are sure that you don't have any debt still, your CIBIL score is low; there are chances of a mistake in your credit report. You can ask for the CIBIL report and check it thoroughly to ensure no error is made.
There are also chances of identity theft if you find any unidentified credit account. In such a case, you should immediately reach the bank and discuss the false credit account on your name. You should also inform the credit bureau about this issue and let them take appropriate action to rectify your credit score.
For a newbie who is recently introduced to the financial journey, a credit recovery firm can help you. They are specialized in understanding your CIBIL report and finding discrepancies. Further, they know the right practice to attend to the issues and rectify them quickly.
So, it's essential for Gen-Z and people who are less educated in the finance field that the CIBIL score has numerous other uses which you can't miss out. If you are already aware of the CIBIL score, you have made an intelligent decision to maintain it. However, if you have a bad CIBIL score, the above-listed points can help you bring your CIBIL status back.