Lenders typically decide on rate of interest, term period or tenures, loan amounts, etc. based on numerous factors relating to the income as well as stability. However, this generally happens only after they deem that one is not a risky candidate who will set default on payments as well as or clear cut with the credit. In order to do this, they typically credit information bureaus such as CIBIL, Equifax and Experian.
CIBIL provides information from such members. CIBIL is a very large database of borrower information wherein lenders share with each other to protect themselves from possibly lending to defaulters.
How does CIBIL affect your loan application?
As it is a popular fact that CIBIL scores showcase the creditworthiness, capacity and innate capabilities to repay the loan. A personal loan in Delhi is highly dependent on an individual’s CIBIL Score.
To be eligible for a loan, the score must be at least 750. The closer it is to 900, the more impossible it will be for them to avail a loan approved at an improved rate of interest as well as on enhanced terms.
CIBIL score 0 expedient the information about the borrower’s history of credit is available only up to a period of less than 6 months in overall. Also known as “NA” or “not applicable”.
CIBIL score -1 means that no information about the borrower’s credit history whatsoever. However, there is no information to report, nevertheless such a score is also known as “NH” or “no history”.
Factors Affecting the CIBIL Credit Score?
There are numerous factors affecting a person’s credit score. Before availing a personal loan in Delhi, certain factors are indispensable affecting CIBIL Credit Score.
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Defaulting on payments: This is the key factor impacting on numerical CIBIL score negatively. Repayment behavior, whether good or bad, is delineated to CIBIL as well as this would be recorded in the report. It will also reflect in the score. Such information is crucial for lenders who are trying to fathom out the creditworthiness. Scores above 750 are mull over eligible.
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Default list matching: Banks and financial institutions maintain lists that contain the name, age, address, current employment, as well as other kinds of details of individuals who default on the payments. If the details submitted are at times mistakenly matched with any of the defaulter’s details, it would be denied a loan prior to the bank even checking the CIBIL rating. There have been possible scenarios wherein someone who has moved into houses priorly occupied by defaulters along with submitted address is matched with the “address” records of defaulters, suffocating their chances of availing a loan.
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Standing guarantor on a defaulted loan: A guarantor is predominantly to be as responsible for loan repayment even if not in a purely literal capacity just like a borrower. A standing guarantor to a loan is defaulted, it would affect the CIBIL score and report negatively.
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Over-borrowing: If one has taken out multiple loans previously, in spite of whether one is able to honor them or not, banks will clearly unapprove the loan as they deem certain individuals as credit hungry. Even though the record is clean, it would be considered a risky candidate who can possibly default at any time.
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If you are overleveraged: One can only assign a possible amount of the declared income to clearing debts. If they earn Rs. 50,000 per month, and have three other loans one is clearing by paying Rs. 10,000 per month. Then they are left with Rs. 20,000 for survival as well as personal expenditure. Banks will not approve another loan deemed to be overleveraged. The DTI (debt-to-income) ratio will be unlikeable and it will not be able to allocate more income to clearing off a novel loan.
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Inadequate tax-paying history: Banks prefer applications who actively files an income tax for at least two years prior to the application. It is accessible to judge the creditworthiness of such individuals as there is an existing record apart from CIBIL that can nudge them in the apt direction.
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Ratio of secured loans to unsecured loans: Secured loans are taken against securities including assets or with a guarantor such as home loans, automobile loans, etc. Unsecured loans are taken without any security for instance personal loans, credit cards, etc. A likable ratio would be one which has more secured loans than unsecured ones.
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How much one owes to the lender: The credit utilization accounts to 30% of the credit score. The total credit card limits along with the percentage of the limit which one utilizes. The credit utilization balance is outstanding on all the credit cards as a percentage of overall credit limit on all credit cards. If one uses more than 30% of credit, the profile is considered to be risky.
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Credit history length: The amount of time one has been utilizing credit is also a critical factor affecting 15% of credit score. The longer the credit history, the better the score.
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Credit checks frequency: When applying for credit, lenders run request information on CIBIL reports. A lot of CIBIL inquiries as well as most lenders pulling up the credit records. It will reduce the credit rating.
