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Want to save Money? Get your CIBIL Score today!

Credit Sudhaar | 08 Feb, 2016  | Follow Author | Add to my Favourites 
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Saving money is not only the first step towards creating wealth but one strives to save money for various other reasons like retirement, child’s education or marriage, exigency fund or any other reason. However, on account of various factors like high cost of living and today’s consumerism driven life style, among other reasons, has made this highly important task of our financial lives quite daunting.


Managing a good CIBIL score can be another way to save money. Let us learn how can aid our efforts to add reserves for various future needs.


Banks and other financial institutions today rely on that all-important information contained in an individual’s credit report before sanctioning a loan or approving a credit card application.


The CIBIL (Credit Information Bureau Limited) score is a three-digit numeric indicator of a person’s credit worthiness, i.e. the ability as well as the intention of the individual to repay any outstanding debt. It informs a lender whether extending credit to this person would be risky, and what is the likelihood of the loan going ‘bad’, or the customer defaulting on payments. Ultimately, a score is merely a guideline – the decision of whether to lend or not depends entirely on the financial institution, after factoring in several parameters. The starting point for all loan decisions is actually the CIBIL score. Indeed, a free CIBIL score is really the need of the hour for most adult Indians!


Across the world, lenders use risk based pricing model, by which the interest rate at which a loan or credit card will be approved is determined. With a higher score, it is more likely that the loan will be given at a better (or lower) rate of interest.


How does one save money with a good CIBIL Score?


A credit score is typically between 300 and 900, and the closer you are to 900, the better is your score. Most lenders consider 750 and above to be a healthy score, but that does vary from lender to lender, depending upon their risk appetite.


Let us take a case wherein a person with a low score applies for a home loan. A lender may deny the loan altogether, not deeming it a viable option, forcing the customer to look elsewhere. Another lender (say a smaller or lesser-known NBFC) may choose to sanction the loan; however the interest rate offered would be significantly higher than it would have been for someone with a better score. In some cases, this rate can be as high as what a personal loan rate may be, for instance. Further, the amount sanctioned may also be lower than it would have been otherwise. 


In order to make sure that you receive a preferential rate when applying for a loan, you need to therefore have a good credit score.


Let us take an example: Rahul and Rohit both apply for a home loan of Rs.1 crore each with the same bank. Owing to a good credit score, Rahul is given a rate of 9%, while Rohit’s loan application is approved at 13%.


Rahul’s EMI would be Rs. 89,983 per month for a term of 20 years, while Rohit would pay Rs. 1,17,158 per month for the same tenure. Over the tenure of the loan, Rahul will save more money by virtue of a lower interest rate, while Rohit will naturally pay more. Therefore it may not be impossible to get a loan for a low credit score, it is likely to be sanctioned at less than competitive terms and conditions. In the long run, a good score can help you save money, like in the above example by way of interest costs.


What can one do to improve the CIBIL score?


In order to improve the credit score, the first thing to do would be to call for a copy of your credit report.


Additionally, you can also avail of a free credit report via Credit Sudhaar, India’s premier credit health management company. Absolutely free of charge, this report will tell you all you need to know about your credit health.


Once you have received your report, go through it in minute detail. Check for any discrepancies or errors therein, as any incorrect information can prove damaging to your score. Information of this nature can be rectified once brought to the notice of the concerned bureau.


If your score seems low, consider availing of the services of a credit health management company. Working with a dedicated credit counsellor, you can  improve CIBIL score; all it takes is a certain amount of financial discipline and patience.


In the end, you need to stay credit healthy in order to enjoy your financial life. This can be done by regularly monitoring your score (say every year, or before you plan to apply for a fresh line or credit), and being judicious in your spending habits routinely. With a good score not only do you get credit when you require it the most, but it can also save you a fair sum of money by way of interest costs as well as other fees and charges. It is never too late to become credit healthy – get your score now!


Summary:


A good credit score is much essential not only to get loans but also to get them on favourable terms.


Written by Arun Ramamurthy, author of “Unlock the Power of Your Credit Score” : India’s first book on credit scores

 




About Credit Sudhaar

Credit Sudhaar is India's first credit and finance platform for consumers which provides various credit and financial tools such as free credit score, credit monitoring, credit score simulator among others. Credit Sudhaar also provides a wide range of analytical assessments to the users helping them to have an in-depth understanding of their credit health. Apart from extending guidance on how to improve CIBIL score, Credit Sudhaar also facilitates access to various loans and credit facilities based on current credit health. .


For more information please write in to [email protected]


Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.




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