Every entrepreneur understands the importance of CIBIL score for a business loan. Every finance lending company before giving the green signal to the loan application ensures that the credit score of the borrower is excellent, which is from 700-900. However, there are situations where the borrowers undergo financial mismanagement, which affects the overall credit score and finds it difficult to get a loan for the business purpose.
A CIBIL score is a measure of your creditworthiness represented in three digits. Ranging from 300-900, you need to try getting your score close to 900. Higher the CIBIL score, the higher the chance of getting the loan.
If you are wondering how to check the CIBIL score, then online finance websites offer complete assistance for the same. You can compare the CIBIL score range 2018 with the previous year and current. This will certainly help you know your stand or eligibility.
Before we know what mistakes can affect your CIBIL score, let us first how to check the CIBIL score.
Checking CIBIL Score
There are two ways to check CIBIL score:
Online Process: If you are not aware, then you must know that you can now quickly check the score online. It is highly advised to check your credit history at least once a year. By knowing, the CIBIL score for business loan will certainly help in growing your business. It is best to acquire the credit score from the financial company to get a perfect score.
Here are the steps to get CIBIL score online:
- Request the report on the official website of CIBIL and follow the process.
- Fill the online application form with all the information asked. Make sure every piece of information you include is accurate and matches with the documents attached.
- Once all the formalities are complete, you will receive the credit report via email.
You can also get the credit report offline by sending the printed application with all the documents to the respective CIBIL representatives. Once the verification is done and the report is completed, it will be sent to your given address.
Importance of the Good Credit Score
When you fill out the application form for a business loan, providing a high CIBIL score will certainly work on your side. Let us check why a high credit score is important:
- Higher Credit Limits: If you have a good credit score, both the credit card lender and finance lender will have trust on you. Once the lender has trust, you will get higher credit limits and a better interest rate. Higher credit limits mean you can spend more.
- Easy to Obtain Credit Cards: Credit card lending companies are more careful before approving credit card applications. If you have a proven record of on-time card bill payment and have better financial stability, then it becomes easy to get a credit card.
- Faster Business Loan Process: CIBIL score for a business loan is an important aspect to consider. Finance companies, when offering small business loans, do check if you fall under the eligibility criteria, and the CIBIL score is an important part. If you are running a small or medium-sized business loan, then make sure to have a good credit score.
Mistakes that can affect your CIBIL Score
- Delayed Credit Card Payments: Also one of the major reasons, the mistake behind the bad credit score is the delay in credit card payment. If you are among those who have the habit of unplanned spending and delay in credit card bill payment, then you need to work on it. The finance lending company would check whether you pay credit card bills on time. A single delay can affect your credit score. The best advice is if you are not so good at handling credit cards or finance, never consider applying.
- Applying for Multiple Loans: There are times when you will need multiple loans to cover urgent financial needs. However, these multiple loans can affect your credit score. Every time you apply for a loan, you will undergo heavy inquiry. Every hard enquiry will bring down your credit score and rejection in your loan application.
- Not Regularly Checking CIBIL Report: Another major mistake you do is not regularly checking the CIBIL report. There can be errors in the report that can bring down the score. The credit report carries all your personal information and details of your credit. All errors will be reflected in your report. So it is always recommended to check the report regularly.
- Closing of Old Credit Cards: Your old credit card carries a long credit history, which you might lose if you close it without having a check. Having a long credit history will add weight to your existing card. Finance experts always recommend avoiding closing old credit accounts.
- Maintaining for High Credit Utilisation Ratio: The credit utilisation ratio is the percentage of the credit limit to be used by you when needed. It is always advised to have low credit utilisation if you want to improve the credit score. This means you should not max your credit card limit. Finance experts recommend that you should use 30% of your credit card limit.
Where is the CIBIL Report used for?
The CIBIL report plays a pivotal role in your financial requirements. From a business point of view, a good CIBIL score to avail loan is essential. Whether you run a small or medium-sized business, a good CIBIL score is vital. Some of the ways how credit report can help:
- Hassle-free loan and credit
- Quick loan finance
- Get higher limits approval
One can avoid bad credit score if handle finance things strategically. Learn from the financial mistakes that happened and manage your business promisingly. This will lead to getting easy business loans for the long term.