Credit Score: It is very important to have CIBIL score to take a loan from the bank, without it you may have to face many problems in getting the loan. Actually, you can get loan even without CIBIL score. In this the bank checks your background and payment history. However, if the CIBIL score is good, it is very easy to get a loan.
What is CIBIL score?
CIBIL score is also called credit score. It is a 3 digit number between 300-900, which tells whether you have ever used a credit card or taken a loan. If yes, then how responsibly have you returned the loan money or made EMIs or payments?
Generally 300 is considered the worst score and 900 is considered the best. If the score is good, the loan is approved quickly, that too at a good interest rate. But many times the loan request is rejected even if the CIBIL score is good. Suppose if your CIBIL score is 750, then it will be considered good. But many times the loan gets rejected even if the CIBIL score is 750. Do you know what is the reason for this?
debt-to-income ratio
Your debt-to-income ratio is a big factor behind this. The bank wants that less than 40 percent of your monthly income should be spent on EMI. Financial advisor Ritesh Sabharwal tells that if you have a salary of Rs 1 lakh and Rs 45,000 goes in EMI, then your DTI will be 45 percent. In such a situation, even if your CIBIL score is 750, the bank will refuse to give you a loan because the bank will consider you an excessive borrower. High DTI means that you may face difficulties in repaying the loan, due to which the bank becomes alert.
Applying for loan more than once
Applying for credit cards or loans multiple times in a short period of time also makes matters worse. If you have requested for a loan more than three times in three months, then the bank looks at it from a negative perspective. The bank sees signs of your being under financial pressure and sees the danger of financial risk. Many times, people who change jobs frequently face difficulty in getting a loan.
How to improve?
Sabharwal says that you can increase your chances of getting a loan by keeping the debt-to-income ratio below 40 percent, maintaining a record of staying in the same job for a long time, using 30 percent of your credit limit, making regular loan payments from time to time and not applying for loans again and again.
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