When you find your business loan application rejected, it is most probably because of a low CIBIL score. Well,before moving forward, take a brief idea about a CIBIL score.
A significant part of the Indian financial system, CIBIL score is regulated by Credit Information Bureau (India) Limited, a govt. body established back in 2000, to assess a borrower’s creditworthiness. The score is a 3 digit figure in the scale of 300 – 900 where above 750 signifies a good credit mark. With an excellent credit rating, you can avail many financial solutions for business.
Now, how to improve this credit score?
Here are a few factors which can affect an individual’s credit score with essential improvement tips.
Factor 1: Repayment history
A person’s repayment history largely affects his/her credit score. For a good score, make your bill payments along with all loan repayments within the due date. Remember, overdue or missed payments poorly impact the same reducing your chances of business loan approval.
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Tip: You should never default on credit payments. If you have any outstanding dues, you must pay those immediately to improve your CIBIL score.
Factor 2: Applying to many lending institutions
Applying for too many credit cards or loans unnecessarily can negatively impact your credit score. The reason being CIBIL regularly monitors all applications; hence, the rejected ones would significantly lower your score.
Factor 3: Incorrect information in credit report
Any inaccuracy or incorrect listing in credit reports also reduces your score. Hence, keep a regular check on the same.
Also, there are ‘credit hungry’ people who frequently change their old credit cards to get new ones. However,having those old cards with timely repayment history can improve the CIBIL score largely.
Factor 4: Using credit card above 50% of the limit
To improve the approval chances of your unsecured business loan application, you must reduce usage of your credit card by 50% of its limit. Doing so would increase the score immediately, signifying that you aren’t dependent on it for making your payments.
Tip: Getting a new card to improve the score isn’t going to work. Your existing cards would be your saving grace!
In fact, you must get the checklist of applying a business loan.
A healthy 750+ score not only increases chances of the loan’s sanctioning, but also makes you eligible for attractive business loan interest rate, approval for higher limits, etc. With a good rating, you can avail up to Rs. 30 Lakh from Bajaj Finserv, one of India’s prominent non-banking institutions. What more? Get the amount disbursed in just 24 hours.