CIBIL Rating OR Credit Rating defines your creditworthiness and helps Bankers to decide if you qualify for a loan or not. The credit history of a borrower is crucial in determining the CIBIL Rating. As per CIBIL, the Credit Rating should range from 1 to 10, and those with Creding ratings close to 1 get quicker loan approvals.
The higher the CIBIL Rating, the greater are the chances of getting a loan! Banks need to ascertain if their borrowers can repay the loan in the future or not. The final credit score will decide your eligibility for future credit facilities.
Below are the major factors that affect your CIBIL Rating:
Payment history:
This is an important factor that can affect your CIBIL Rating. Payment history is a review of all borrowings and repayments done by you. Your business might get a low Credit Rating if it has a poor background of loan repayments. Your outstanding debt symbolizes that you are not capable of managing the loans. Hence, this will degrade your CIBIL Rating. Delaying in payments of the dues or EMIs can affect your credit score adversely. It is mandatory to make payments on time to maintain a healthy credit score.
Credit mix:
It is necessary to manage a proper combination of secured loans and unsecured loans to have a good credit score. Too many personal loans and unsecured may hurt your Credit Rating and may be seen unfavorably by lenders.
All businesses should keep a healthy credit mix. Having just one type of credit will not update the CIBIL Rating. A healthy mixture of credits depicts the strength of a business to tackle all sorts of debts favorably.
Multiple inquiries of loans:
Do you recognize that doing various credit queries can negatively influence the CIBIL Rating? One or two inquiries are ok. But going away can have some harsh effects on the credit image of the company. Companies should withdraw from making inquiries if they are not certain of their eligibility for taking a loan. Additionally, all should avoid demanding a credit immediately after the rejection of their loan application. People should wait for at least six months before applying to let their CIBIL Rating better.
Existing DEBTS:
The company’s existing debts and loans can also affect its CIBIL Rating to a great extent. If a company has various debts going under its name, it can lead to a lower rating till it maintains to repay all of them favorably. You can avoid this circumstance by not applying for many loans at the same time.
High credit utilization:
If you make use of excessive credit, it will adversely affect your credit rating. It is evidence to lenders that there is a raise in your debt that shows your profile at risk of not repaying your credit card dues or loan EMI’s on time. Therefore, always use your credit limit to a minimum.
