Planning on purchasing a new car? Before you start lookin
g for sources to finance your purchase, ensure that you have an excellent credit score. Generally, lenders look for a credit score of above 700 points before approving your car loan application.
A CIBIL score is detailed credit history and credit worthiness of a person. Based on this history CIBIL will give you the score from 300 to 900. Higher the CIBIL score will be better for getting approval of your housing loan, car loan, personal loan or credit card. Also without knowi
ng your credit history if you apply many times for loans or credit cards then your score will decline!!!
CIBIL and car loan rates, both are interlinked. CIBIL is credit information bureau of India limited, and the main purpose of this agency is to preserve and present the entire history of an individual repayment history for all the banks and financial institutions who are its members.This information is provided to the CIBIL by these banks only and all this information is provided to them on personal request whenever any person a pplies for ant credit facility, to check the payment track record of that person. On the basis of the payment history, every individual is issued a score and this score is known as CIBIL score. This score reflects the overall status and commitment towards the debts of an individual and plays a very crucial role is getting you a car loan. Your auto loan rate depends a lot on your credit or CIBIL score, but it is not also the only factor on which your interest rate would depend. The score ranges from 300-900 and on basis of your repayment status and regularity, credit bureau issues a score to you. * Your car loan rate will be higher if your CIBIL score is low and would be lower if your CIBIL score is high. For this we will have to understand the complete scoring sy stem. Your score is considered to be good or high, if it is 750 or above and it is considered to be lower or bad, if it is less than 500. Anything between 501-699 is said to be an average credit score. Your lender while assigning an interest rate on your car loan does take into consideration, your score.
* CIBIL and car loan are interlinked in this way. Your lender would charge low rate on your car loan, if your CIBIL score is high (700 or above). On the other hand, if your score is about average (501-699), then the rate charged would be slightly high but there won’t be a much difference. Now, if your score is bad or poor; which is less than 500, then your lender would charge a very high interest rate on your car loan.The reason behind this is, people with high or average scores are considered to be high profile people and the risk factor involved is less as in case of low score profiles. High rate is charged to recover some good amount of money in fewer Emi’s only, so that if in case the borrower stop making the payments afterwards, the bank would not be in complete loss.
Even after a decade of its existence, CIBIL scores are more of an enigma to the layman. Some even have developed a kind of aversion to these scores. There are several unknown facts surrounding the CIBIL score. Some of these are a result of an acute lack of awareness while others are carefully cultivated myths based on a limited understanding of the subject.
With the concept of a score now gaining recognition and usage increasing, there are some unknown surrounding it. Here, we give you the lowdown on what are those:
1.Cibil Is The Only Credit Bureau
CIBIL is not the only Credit Bureau in India. There are four credit bureaus in the country today, namely CIBIL, Equifax, Experian and CRIF High Mark that are licensed to operate by the Reserve Bank of India. However, with CIBIL being the oldest of the four, the term CIBIL score/ report is used interchangeably with a CIBIL SCORE/ report. All bureaus provide individual reports.
2. Enquires Of Loans And Credit Cards Reduce The Score
In actuality, applying for multiple new credit options can make your score take a nosedive, and fast! This is because each prospective lender will make an enquiry against your report, and each such ‘hit’ brings down your score. What this indicates is credit-hungry behaviour, and the possibility of your being insolvent – which in turn will make lenders stay away, even when you genuinely do require a loan!
3. A Low Score Means I Will Never Get A Loan Or Credit Card.
Not necessarily, every financial institution has its own lending score bandwidth. You may get a loan but the interest rates and charges may be higher as the perceived risk associated with a low CIBIL SCORE is higher.
4. A Bounced Cheque Will Have A Negative Impact On My Cibil Score.
Since your savings or current account details are not a part of the credit report, a bounced cheque does not impact your CIBIL SCORE. However, if you have missed an EMI or credit card payment (because of the bounced cheque) it will have an impact on your CIBIL SCORE.
5. Restoring A Poor Score Is Impossible
Having a low or a bad score may not have an immediate quick-fix solution. It is advisable to take the assistance of credit repair companies should you wish to better your score. However, this does not mean that over time with financial discipline and judicious planning it cannot be restored. Pay your outstanding in time; any delayed or late payments will negatively impact your score.
6. No Loan Equals A Good Score
In fact, this could prove to be just the opposite! Having a healthy credit history is a good indicator of your creditworthiness to a lender, and will in fact enhance your score. Of course, the key to a good repayment record is timely payments and avoiding CIBIL defaults , so do keep that in mind!
7. What Is “Na” Or “Nh”?
This happens if you do not have credit exposure, which means you have not taken any loan or do not have a credit card or have add-on cards.
Though some banks may not approve your credit card application if your CIBIL SCORE says NA or NH, some banks accept such an application.
8. Settling Accounts Is Not Negative?
A loan settlement means a bad debt where bank had to suffer losses. It affects your CIBIL SCORE drastically and you will not get a loan in future as majority of the lender will consider you as high risk for lending.
Therefore, never go for a loan settlement. Cut corners or borrow from relatives or friends but pay back the full amount. Once you’ve done that, remember to ask the bank to provide you with an account closure statement, a proof that the loan has been paid in full and the account has been closed.
9. My Assets, Income, Investments; All Have An Impact On My Cibil Score.
CIBIL report contains details related to your loan and credit card. It shows how good or bad you are when it comes to repayment. Your bank account status, investment in equity or other financial tools, details of real estate or other assets has nothing to do with CIBIL.
CIBIL only evaluates the loan history and provides a score based on it. At a later stage it is the bank which may enquire about your income proofs or assets for collateral security.
10. Having My Name With Cibil Means That I Am A Defaulter.
Every bank or financial institution, which provides credit facility, submits a detailed report of all individuals on a monthly basis. Thus, if you have taken a loan, the CIBIL will have your repayment data with it. Repaying your previous loans on time will be taken as a good sign and will instil loan providers to sanction further loans quickly.
11. Cibil Has The Authority To Make Changes And Corrections In My Credit Report Directly.
CIBIL is not authorised to make any changes in your report directly. Any change that needs to be carried out has to be initiated/approved by the respective bank & credit institution and only then can CIBIL make any changes to your CIR. However, CIBIL helps facilitate this process.
12. Your Income Determines Your Cibil Score
In fact, the revenue of a person has no role to play in determining the credit rating. Imagine a person A who earns around Rs.75,000/- per month but has unpaid credit card bills and has availed a number of loans. Another person B makes a modest salary of Rs.30,000/- per month but pays his bills on time and has only a smaller EMI to pay every month. Person B is bound to have a better CIBIL score when compared to person A.
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