CIBIL score is an important eligibility criteria for a business loan. In this blog, we shall discuss how to improve CIBIL score to avail a business loan at low interest rate.
Many small business owners are looking for different ways of how to improve the CIBIL score as it is an important criterion to avail a business loan. However, there are some small business owners as well who do not even know what a CIBIL or credit score is and how it can affect their business loan taking ability.
It is a three-digit number that ranges from 300-900. It is generated on the basis of the borrower’s credit report and credit history. A good credit score is an important business loan eligibility criteria and an important element that approves or disapproves the business loan. Therefore, maintaining a positive credit score, i.e., closer to 900, can improve your chances of getting a business loan approved by the various lending institutions.
Well, one important thing that one requires to understand here is a good CIBIL score to avail loan is not generated fortnightly. It is a process of long efforts of paying all the debts on time and looking for situations that can have a negative effect on the CIBIL score and correcting them.
Let’s take a look at how to improve CIBIL score to avail business loan without any troubles.
Keep A Track Of CIBIL Score
Since a good credit score is an important business loan requirement, it is mandatory that you keep a track of it. It will help you analyze the situations which are bringing the score down and thus, you can correct them. Also, in case any wrong information is mentioned in your credit report, you can get it corrected by the bank.
Pay All Debts On Time
The timely payment of all the credit shows the responsible behavior of the borrower. Also, consistency in the payment of debts will build creditworthiness and result in a positive impact on the CIBIL score which will help in getting a business loan without any problem. It is suggested that you must not wait for the last due date to pay the bills. Ideally, the bills and debts should be paid at least 5 days before the last day of payment.
Do Not Apply For Loan To Multiple Lenders
Another rule for a positive CIBIL score is to not apply for an SME loan to multiple lending institutions. Also, if your business loan application was rejected recently, it only makes more sense to not to apply for term loan or any other type of business loan for at least more than a couple of months. If you apply for business loan back to the back, it will only lead to a negative effect on the CIBIL score.
Additionally, if you have recently repaid your last business loan, do not apply for another loan for at least three months. This will bring in notice your credit hungry behavior which will bring down your CIBIL score.
Don’t Use Credit Card To Its Full Limit
A good and wise credit card usage will establish your financial discipline and financial management behavior. You can follow the 30% of credit card rule, i.e., your credit card usage should not exceed more than 30% of the credit limit.
It is wise to not wait to improve your CIBIL score only when you want to avail a business loan as, on an average, it takes from 4 to 12 months to improve CIBIL score. Well, the bottom line is a good credit score for loan approval is important and the 4 afore-mentioned points will help you attain a healthy CIBIL score.