How Much CIBIL Score is Required for Car Loan– A borrower’s credit history is summarised in three digits by the CIBIL Score, often known as the “Credit Score.” The company that determines and maintains your credit score is called CIBIL, or Credit Information Bureau (India) Limited. In a nutshell, it refers to how successfully you have managed your prior financial obligations, such as a mortgage, a personal loan, or credit cards.
The ‘Accounts’ and ‘Enquiries’ are parts of the CIBIL Report, which may include (but are not limited to) loan accounts or credit cards, payment statuses, and outstanding amounts. A CIBIL Score ranges from 300 to 900; the closer it is to 900, the greater the likelihood that a consumer’s credit card or loan application would be granted.
The CIBIL Score displays a consumer’s creditworthiness. For instance, when a person applies for a credit card or loan, one of the crucial things that lenders look into is, their credit background, as shown by their CIBIL Score.
The largest consumer data collection is held by TransUnion CIBIL, formerly known as Credit Information Bureau (India) Limited. TransUnion CIBIL is the major provider of credit information in India. It was founded in 2000.
What Elements Influence a CIBIL Score?
The CIBIL Score is produced by a scoring algorithm that considers numerous data sources and broad credit patterns. A 36-month credit history serves as the foundation. Payment history, credit mix, inquiries, and credit utilization are the main four factors that have an impact on a consumer’s CIBIL Score.
However, the most recent CIBIL Score algorithm also takes into account your depth of credit, the long-term trend of your outstanding balances, your credit card usage history, the ratio of your actual repayments to your total debt, and the opening and closing of new accounts.
Credit Score values can range from 300 to 900:
- 750–900 is an excellent CIBIL score.
- 650–750 is considered a good CIBIL Score
- 550–650 is the average CIBIL score
- 300–500 CIBIL score is poor
How to Check CIBIL Score Online
Utilizing the credit history contained in the CIBIL Report, the CIBIL Score is generated. It considers the past 36 months of borrowers’ credit histories. The credit profile contains information on all loans, including credit cards, personal loans, vehicle loans, overdraft facilities, and home loans, as well as payment history.
- Go to the official CIBIL website to find out how to check your CIBIL Score online.
- Click on “Get your CIBIL Score.”
- Your name, email address, and password must be entered. Include identification documentation, such as a passport, PAN card, Aadhaar, or voter ID. Next, key in your PIN code, birthday, and phone number.
- Select ‘Accept and proceed’.
- An OTP will be sent to your mobile number.
- Enter the OTP and then click “Continue.”
- 7) Click “Go to dashboard” to view your credit rating.
- You will obtain your CIBIL score report free of charge following successful verification.
How Can You Improve Your CIBIL Score For Car Loan?
Maintaining a solid credit history will help you raise your CIBIL Score.
- The most crucial factor in preserving a positive credit history and high CIBIL Score is timely payment of credit card and loan EMIs.
- It’s preferable to have a balanced mix of secured (like a mortgage or car loan) and unsecured (like a credit card or personal loan) loans.
- Monthly check on your shared accounts.
- Regularly during the year, review your credit history.
What is The Importance of Credit Score in Obtaining Car Loans?
A decent credit score (one of at least 750) can be crucial when looking for a car loan. This is due to the fact that a higher score increases your chances of obtaining a car loan approved because lenders will notice that you have historically been a responsible borrower.
Additionally, some other variables impact your credit score which are as under:
- Determines whether a loan request is approved or denied: Your creditworthiness is assessed by your CIBIL score and other credit scores, which helps lenders decide whether to approve or deny your loan requests based on your prior repayment history.
- Determines the rate of interest: A higher score also indicates greater financial responsibility. Lenders are therefore more likely to offer you a reduced interest rate, and you will also have the option of haggling over the interest rate. Lower scores, however, put lenders at risk, which causes them to hike the interest rate.
- The loan’s amount is decided by a higher vehicle loan amount may be available to you if you have proof of your creditworthiness and a solid payback record; nevertheless, a low CIBIL score may prevent you from receiving the loan amount you want.
Can You Get a Car Loan If You Have a Low CIBIL Score?
Even though a high credit score increases your chances of getting a car loan approved, a low credit score or a lack of credit history (i.e., no prior loans or credit cards) does not automatically disqualify you from getting a car loan. Please take note that if your credit report indicates that you have no credit history (NH/NA), you probably have never had a loan or credit card. When determining your eligibility for a car loan under such circumstances, lenders frequently take into account the following factors:
- Income: Your chances are better if you can demonstrate that you have a reliable source of income that can support the repayment of loan installments on a monthly basis.
- Loan Amount: Compared to applicants with excellent credit scores, those with low scores are at a larger risk of defaulting on their auto loans. As a result, you can choose to request a lesser vehicle loan amount and opt for a bigger down payment option to boost your chances of getting a car loan approved.
- The co-applicant/guarantor: Guarantor is the one who co-applies with someone who has a more reliable income and a better credit rating. You might also think about having a guarantee so that the lender can approve the loan knowing that not only you but also your guarantor are capable of repaying the loan.
What Role Does CIBIL Score Play in Car Loans?
Even though it is just one of several criteria used to determine your eligibility for a car loan, your CIBIL Score is crucial to your ability to obtain one. The following are the main ways that having a high CIBIL score makes getting a car loan simple:
Approval of Car Loan
CIBIL score and other credit scores provided by other credit bureaus serve as a direct indicator of your creditworthiness for the purpose of approving car loans. In other words, it aids lenders in assessing your eligibility for future loans, such as auto loans, based on your prior repayment behavior. Therefore, the likelihood that your car loan will be approved increases with a higher CIBIL score.
Interest Charged on a Car Loan:
The interest rate charged on a car loan may also be influenced by your credit score. Lower interest rates are the outcome of higher financial responsibility, which is reflected in a high CIBIL score that is close to 900, such as 750 and above.
Car Loan Amount:
If you have a strong track record of on-time payments, you could be able to get a larger auto loan, such as one that requires 100% financing and no down payment. On the other hand, a low CIBIL score of 600 or lower lowers your creditworthiness and can prevent you from getting the loan amount you want.
You can get a car loan even with a low credit score since the banks will hold the car as security until you pay back the full loan amount plus interest. Even though you can apply for a loan without a CIBILTM score but keep in mind that the process can be drawn out and that it will be much harder to get approved.
You can also only be given unfavorable loan terms and circumstances. Some of them can have a greater interest rate or a quicker repayment schedule. You can obtain a car loan with a strong CIBILTM Score and can be benefitted from reduced interest rates, longer payback terms, greater loan amounts, and easier documentation. I hope you liked the post How Much CIBIL Score is Required for Car Loan and please do share with others.