At the time of seeking loans from banks or any other financial institution, the borrower’s CIBIL score is looked into. The score ranges from 300 to 900. The higher the score, the better it is. Generally, a score above 750 is considered good where the chances of loan approval become higher.
Banks approve loans or issue credit cards to only those having a good CIBIL score. The CIBIL report contains the score and other credit details. Banks after examining the CIBIL report can ascertain the repayment discipline of the borrower. It also gives a glimpse of the person’s credit risk profile, based on which banks take a decision whether to issue a loan or not. Here’s why a good CIBIL score is important and what’s the benefit of a good CIBIL score:
Cheaper Loans: Banks offer interest rates on loans based on the risk profile of borrowers. If a borrower’s CIBIL score is good, banks may offer a lower rate of interest as compared to those having a lower score.
Quicker Loan Approval: Those who have good credit scores usually don’t face delays in loan approvals. Financial institutions tend to approve loans easily to those having a good CIBIL score.
Higher Credit Limits: Taking big loans from banks requires a really good score as it involves higher risk. If you have a good CIBIL score, you may be offered a higher amount of loan or higher credit limit as compared with those with a lower score.
Pre-Approved Loans: If you have a good CIBIL Score, you could be offered pre-approved loans or credit cards from your bank, a great way of getting a quick personal loan.
Cards With Better Benefits: Credit and debit cards come with some benefits and rewards. However, those who have better credit repayment history and hence a good CIBIL score, the banks offer better benefits and rewards.
The Reserve Bank of India (RBI) in 2017 made it compulsory for all the credit bureaus in the country to offer one free detailed credit report per calendar year, which is available on the official website of CIBIL.
Credit card issuance in India, according to a PWC report, has grown significantly at a compound annual growth rate of 20 per cent in the past four years. The number of credit cardholders increased from 29 million in March 2017 to 62 million in March 2021. It has further grown by 26 per cent and 23 per cent, respectively, in 2019 and 2020.
As per the latest RBI data, credit growth in India continues to be driven by retail lending. An SBI research report also said, “Interestingly, retail loans have emerged as the main driver of bank credit in recent years and now have the largest share (30.5 per cent) in the outstanding credit of all scheduled commercial banks, displacing industrial loans (28.9 per cent). Within retail, housing loans have the largest share.”