Impact of Credit Score on Personal Loan: Your credit score is a three-digit numeric summary of your credit history. It, undoubtedly, plays an important role in the loan application process. It influences the interest rates, loan terms, processing time and negotiating power, among others.
For instance, someone with a high CIBIL score of 750 can negotiate for better terms and conditions with a lender than the one with a poor score of below 600.
Interest rates: Your CIBIL score influences the interest rates offered to you. Borrowers with higher CIBIL scores are usually offered lower interest rates because they are seen as lower risk borrowers. On the other hand, individuals with lower scores are made to pay higher interest rates to compensate for the higher risk.
Judging creditworthiness: Similar to credit scores elsewhere, your CIBIL score is used by lenders to assess your creditworthiness. It gives them with an indication of your ability and likelihood to repay loans based on your past credit behaviour.
Loan approval: Banks and financial institutions rely on CIBIL scores when determining whether to approve or reject a loan. A high CIBIL score indicates that you have a good track record of managing credit in a responsible way, thus making lenders more inclined to approve your loan application.
Terms of loan: Besides interest rates, your CIBIL score can influence the loan amount you qualify for and the repayment terms offered by lenders. Higher scores may result in approval for larger loan amounts and more favourable repayment terms.
Faster processing: A good CIBIL score can expedite the loan approval process. Lenders may be more willing to fast-track applications from individuals with high credit scores due to their lower perceived risk.
Negotiating power: A strong CIBIL score can give you negotiating power when discussing loan terms with lenders. You may be able to leverage your good credit history to negotiate better interest rates or other favourable terms.
You may contact your credit card issuer and request a credit limit increase. Many issuers allow you to request increases online or through their mobile apps.
You can improve your credit score by regularly paying bills and keeping credit card balances low, and avoiding to open too many new accounts.
If your current card issuer is not willing to raise your credit limit, you may consider applying for a new credit card with a higher limit.
Using credit card responsibly can show to the issuer that you are a low-risk customer, making them more likely to approve a credit limit increase.
If you regularly make on-time payments and also manage your credit responsibly, you may get an increase without having to ask for it.
