Credit Information Bureau (India) Limited (CIBIL) is a credit company keeping all the records of credit-related activities of individuals as companies, including credit cards and loans. This so-called CIBIL score plays a major role in determining one’s eligibility to avail of a car loan. This series lies in the range of 300-900, a good score is 750+, and a poor is 650 below, a good score increases the chance of eligibility to avail a loan, and a poor score hinders it.
A consolidated report containing the customers’ credit history, bank statements, loan information, personal information, employment information values and validates the consumer’s loan eligibility at great length.
Factors affecting CIBIL score:
The cibil score is generated by a complex algorithm that looks over the following criteria
Credit history: Credit history makes up 35% amounting to the individual’s timely payment of loans and debts. It has the complete knowledge of your Equated Monthly Installments, thereby making it necessary for one to pay on time.
Credit Mix: This shows a credit mix of secured and unsecured loans and is good if either or both types of loans are availed as they might increase your future possibilities.
Public Records: Apart from the personal information the report also looks over the public record of the customer if they have a criminal record or have bankrupted.
Credit Inquiries: Whenever a lender looks over the individual’s credit report the inquiry number keeps adding. So the more the number of credit inquiries, the more the number of loans taken. The potential lender may sign in green or red depending on the timely payments and the loan types.
Credit utilization: This amounts to 30% of the credit report which refers to the credit percent you have used and the remaining percent you can use. The higher the percent, the higher the risk of borrowing. Good credit utilization should be below 50%.
New credit: Every time you take a loan the new credit adds up, meaning taking multiple loans at a time isn’t very good and hinders future chances of taking a loan.
CIBIL score and car loan:
CIBIL scores determine the individual’s loan eligibility widely. A car loan is no different from that, the more the credit score, the higher the eligibility.
Loan Approval: The loan approval for an applicant depends heavily on the credit score, you have a high score, your process is faster and hassle-free. If not getting to sanction your car loan is much harder and in some cases not possible.
Tenure: Sometimes the applicants want the longest time of period to pay their principal and interest and the tenure time is affected by the credit score at great length. If your score is less or poor the chances of getting the tenure you want is low.
Rate of Interest: The interest rate is a part of the total amount calculated in percentage that the loanee needs to pay every month for the loan amount. The credit score affects this, for a lofty CIBIL score the interest rate is less (scores like 800), whereas though few banks might approve for loans there is a giant chance that the bank increases your interest rate for each month, thereby making you pay more than what is necessary.