Based on your past repayment records, a credit information authority CIBIL assigns you a score between 300 and 900 to showcase your creditworthiness. A good CIBIL score of above 750 is crucial to get personal loan requests sanctioned readily by reputed lenders. 

Financial institutions consider the CIBIL score before validating your loan application. Therefore, generating a free CIBIL report and checking your loan eligibility status before approaching a lender is necessary. This guide mentions the advantages of a healthy CIBIL score.

5 Advantages of Maintaining a Healthy CIBIL Score

Having a high CIBIL score automatically improves your chances of credit approval. Apart from this, there are some other closely associated benefits.

1. Instant Loan Approval

Before filling out a loan application, you should conduct a CIBIL score calculation. A good CIBIL score (>750) smoothens the loan underwriting process as the lender gains confidence regarding your loan repayment capacity. 

If you have a not-so-high but decent credit score between 500 and 700, your loan application process can remain pending for some time, if not rejected outright. At those times, it is critical to stay patient instead of applying to multiple lenders. 

2. Better Interest Rates

Even half a percentage decrease in the levied interest can lead to significant financial savings regarding EMIs. Therefore, to avail better interest rates, you should maintain a positive repayment history, resulting in a healthy credit score.

Banks or even the most popular NBFCs are ready to negotiate with borrowers having lower risk profiles. Therefore, chances of securing a low-interest rate are significantly higher if you have  a good CIBIL score. 

3. Negligible Processing Fee

Lenders will charge minimum processing fees from you if you have an above-average CIBIL score. So those who fall under this category can add to their savings by avoiding paying extra processing fees.

Generally, these processing charges range between 0.5% and 2.5% of the entire loan amount. Though the lender fixes the actual margin, you can ensure that you pay a lower amount by building a positive business relationship with your preferred bank or financial institution. 

4. Additional Perks Linked to the Credit Card

Maintaining a high CIBIL score through and through the lender consequently gains trust. Now they can increase your credit limit as you have manifested responsible credit behaviour.

Moreover, chances of getting pre-approved offers improve as the banks or financial institutions feel safer giving the money. Getting a higher credit limit allows you to spend more on credit while maintaining less than 30% of the utilisation ratio, improving your CIBIL score.

5. Flexible Tenures

Suppose you need a long-tenure loan to support an expensive purchase. However, seeing the high-interest rate it will attract, now you are hesitant. In that case, you may negotiate with the lender for smaller EMIs at affordable interest rates. It will help you manage the monthly budget efficiently and lighten the financial burden. 

Before asking for long tenures at a reduced interest, however, you must check your creditworthiness by generating a free CIBIL report from the official website. It will give you more confidence while arguing why the financial institution should grant your request. 

Tips to Maintain a Good CIBIL Score

To avoid difficulty in gaining loan approval, it is necessary to maintain a CIBIL score of at least 700. You can achieve that by following these simple tips:

• Make Timely Payments

It is better to leave no outstanding amount on your monthly credit card bill as it will add to your liabilities. Instead, use the auto-pay feature or set up reminders well in advance to ensure timely payments. 

• Avoid Multiple Credit Requests at a Time

Applying for multiple loans reflect poorly on your finances and money management skills. Therefore, avoid multiple loan applications to maintain a healthy CIBIL score.

• Take a Loan Only if Necessary

You must apply for credit facilities only when you need them. For example, suppose you must buy an essential item immediately, and you are sure you will be able to repay the amount as soon as you get next month’s salary; then definitely avail credit facilities.

• Keep Using Old Accounts

Deciding to close an old credit account impacts your relationship with the lender. Simultaneously, the associated credit history of that account gets deleted. Therefore you again need to start afresh and consequently lose opportunities of enjoying pre-approved deals and lower rates as the credit score drops.

• Review the CIBIL Report Regularly

This step is vital because one can notice if there is any misinformation depicted in their credit report and file a complaint for such inaccuracies immediately. Quick resolution of personal and financial information leads to seamless processing of future loans.

Maintaining an excellent CIBIL score is easy if you stick to disciplined credit behaviour. Depending too much on credit purchases, availing frequent credit facilities or delaying EMIs negatively affect one’s creditworthiness. 

Ensure checking your credit profile at regular intervals, generating a free CIBIL report to know the wide range of possibilities you may avail at times of financial crisis.