CIBIL score, importance and Documents

25/08/2021 0 By indiafreenotes

Adherence to Know Your Customer (KYC) norms while submitting your documents, is a mandatory requirement for purchasing your CIBIL Rank and Company Credit Report (CCR). The objective of performing a KYC check is to enable CIBIL to provide information to the rightful owner.

An ideal CIBIL Score for loans or credit is generally any score between 700 and 900. A good score ensures a higher chance of your loan application getting approved. A score above 750 is considered favourable if you want to avail a personal loan, home loan, car loan, or credit card.

As we are all aware, a CIBIL credit score and Credit Information Report (CIR) is an essential requirement by any banking or institution where you intend to apply for an extended line of credit. This credit score of yours is contained in your credit report which is a comprehensive document comprising of information related to your current and past credit activity. The better your credit history, the higher your score will be. On an overall basis, CIBIL credit score and Credit Information Report reflect your credit rating in the potential eyes of any financial institution or bank. To elaborate further, your CIBIL credit score and Credit Information Report (credit rating) gives banks and financial lenders a quick idea of how reliable you are in fulfilling your debt obligations. Based on your credit score, many financial institutions decide whether to approve your loan or credit card application. Banks have a standard score requirement of 750 (this is also the minimum score requirement) when reviewing your application because it implies that you have been a low-risk customer who has demonstrated a good track record of repaying loans on time. You stand a good chance of being approved for a loan or credit card with a score of 750 or more.

On the contrary, if you have a low score, banks are reluctant to give you any credit and will most probably reject your application for a loan or credit card. Banks already have this information as they report every credit-related transaction to CIBIL on a monthly basis. This information includes your previous payment history with regard to your loans and credit cards, total available credit balance, existing loan and credit cards which are active and additional financial information. All of this is taken into consideration when calculating your CIBIL credit score. The biggest factor that makes up your credit score is your repayment history. Even one or two missed or delayed payments can negatively impact your credit score.

Importance

Makes you Eligible for Loans

Generally, financial institutions and lending platforms consider a CIBIL score of 750 and above as ideal. Hence, it is important to build credit history and get a score as it makes you better eligible to apply for credit under great terms. If you have no credit history and no score, it becomes difficult for lenders to assess your creditworthiness.

Know your Credit Status

When you check your score and report, it tells you where you stand and what you need to focus on. Your CIBIL report is a summary of your present and past credit transactions. Checking your report regularly also helps report and rectify any discrepancies that have lowered your score through no fault of your own.

Advantages

  • Cards with better benefits and rewards
  • Cheaper interest rates on loans
  • Avail pre-approved loans
  • Quicker approval on credit applications
  • Loans with longer tenure
  • Negotiation power
  • Higher credit card limit
  • Discount on loan processing fees and other charges

Documents

  • The applicant must be a resident of India.
  • The age of the applicant must fall within the bracket of 18 to 35 years during loan application.
  • He/she must have a confirmed admission in recognised educational institutes in India or abroad.
  • The applicant must be undergoing a graduate or postgraduate degree or a PG diploma.
  • Applicant pursuing full-time courses need to have a co-applicant who can be either parent/guardian or spouse/parent-in-law. Mandatory documents required for an education loan:
  • Duly filled and signed application form with affixed photographs.
  • 2 photographs of passport size.
  • The applicant should have a secured admission in a college or university affiliated by UGC/AICTE/Govt. etc.
  • Copy of exam mark sheets of 10th/12th or latest education certificate.
  • Statement of course expenses/cost of study.
  • Aadhaar Card and Pan Card of the student and Parent/ Guardian.
  • Age, Identity and residence proof. Income proof can include the following documents:
  • Most recent salary slips or Form 16 of the parent/guardian/co-borrower.
  • 6 months bank statement of the borrower or updated passbook of bank.
  • Documents stating the assets and liabilities of the parent/co-borrower/guardian.
  • Updated ITR (Income Tax Return with income computation) of 2 years or IT assessment order of last 2 years of parent/co-borrower/guardian.