5 Factors Affecting Your CIBIL Score for a Gold Loan and Other Credit
Loans are a popular way of getting through a financial crunch or meeting emergency requirements. Among the numerous options available in the secured and unsecured categories, gold loans are a popular form of availing secured credit.
The easy accessibility of any credit, however, depends on a few factors, such as your credit score. Your credit score is an indicator of your repayment ability and plays a pivotal role in your eligibility for a loan.
As such, it is often recommended that you check your CIBIL score online before applying for a gold loan or any other type of loan. Generally, the ideal credit or CIBIL score for gold loanapproval is 750 or above.
While you may be able to get a gold loan even with a lower CIBIL score, a higher score helps you get a loan against gold easily, faster and more affordably. Read on to learn about the factors that affect your credit score for a gold loan.
Your CIBIL score gives the lender an idea about your repayment ability and capacity. As such, how well you have paid off previous debt is a crucial and major factor affecting your score. If you have paid your previous credit responsibly and on time, you will likely have a higher credit score and vice versa.
You can monitor this aspect whenever you check your CIBIL score online. Your credit report contains information about all the factors that have resulted in your CIBIL score. If you see that your repayment history has resulted in a lower score, take the necessary steps to rectify it.
One of the major steps you can take in this case is to make future repayment on time. Set reminders or auto-debit instructions to ensure you do not miss any due dates for EMIs or credit card bills.
Credit mix refers to the different types of credit facilities you have experience with, such as unsecured loans and secured loans. A good credit mix shows that you can manage different forms of credit well.
Having experience with only unsecured loans can inhibit your score. You are considered a reliable borrower if you have taken on both types of credit and have been able to repay both responsibly.
When you check your CIBIL score for a gold loan, this parameter is important. Try to maintain a healthy balance of credit types before you apply for a large loan. If you have too much unsecured debt, avail of a secure credit facility to improve your CIBIL score.
Credit Utilisation Ratio
This ratio refers to the credit you have utilised against your total available limit. For example, if your total credit limit is ₹70,000 and you have used ₹28,000, your utilisation rate is 40%. A high ratio has a negative impact on your credit score as it shows an over-reliance on credit.
On the other hand, having a low ratio indicates you can manage your finances and do not need to rely on credit frequently. Therefore, when you check your CIBIL score online, look at this aspect closely.
You should try to keep your credit utilisation ratio under 35% to keep your credit score healthy. This will also help you ensure you can repay on time as by taking on less debt, you have the liquidity you need to repay your existing loans on time.
Applying for Credit Frequently
The number of inquiries registered on your profile also impacts your credit score. This, however, is only for the inquiries registered by the lender and not by you. When you check your CIBIL score online, it registers a soft inquiry and therefore has no impact on your score.
On the other hand, when a lender registers an inquiry on receiving your application for credit, it is a hard inquiry and thus impacts your credit score. Having too many inquiries affects your score because it indicates that you need credit frequently, which shows that you may not be able to manage your finances.
This makes you a high-risk borrower and results in higher borrowing costs. As such, try to apply for credit sparingly and never apply for multiple loans from multiple lenders all at once.
If a lender rejects your application, it is best to figure out why that happened before re-applying. This will help improve your approval chances and reduce your frequency of application.
Errors in CIBIL Report
Whenever you check your CIBIL score online, look at your personal and credit-related details carefully in your credit report. Having any errors on your report can harm your score. If you notice any errors, be sure to contact the bureau immediately to get them rectified.
Remember that a gold loan is a form of credit. As such, it will also affect your credit score. While you should check your CIBIL score online before applying, you can also use a credit score simulator. The simulator gives you an idea about how new credit will affect your CIBIL score.
Once you avail the loan, repay it on time and in full. This will help you maintain and improve your CIBIL score for a gold loan or other loans you may avail of in the future. Aim to keep your credit score closer to 900 so you can avail credit speedily and affordably.