How does CIBIL Score affect your Bike Loan - Myth Busted

CIBIL score is a credit score assigned by the credit information company, CIBIL. It is a three-digit score between 300 and 900. The higher the score, the better. It is used by lenders to assess your creditworthiness before extending you a loan.

Most people believe a low CIBIL score can ruin their chances of getting a bike loan. They consider it the be-all and end-all of their financial life, and a low score will prevent them from successfully obtaining the bike loan. However, the reality is often far more nuanced.

Let us examine the impact of CIBIL scores on bike loans and dispel some of the myths surrounding this topic.

What is the minimum CIBIL score required for a bike loan?

There is no fixed minimum CIBIL score required for a bike loan. Different lenders have different criteria for evaluating an individual's creditworthiness. However, having a good credit score is always beneficial when applying for a loan. A score of 750 or above is generally considered a good score and can increase your chances of getting a loan with favourable terms and interest rates. That being said, some lenders may also consider individuals with lower scores, but they may offer less favourable terms and higher interest rates. It's always a good idea to check with your lender about their specific criteria for bike loan eligibility.

Why is CIBIL score important for a bike loan?

CIBIL score is important for a bike loan (and any type of loan) because it indicates an individual's creditworthiness. Lenders use the CIBIL score as one of the primary factors to determine the risk associated with lending money to an individual. A high credit score indicates an individual has a good track record of managing their finances, including making timely payments on loans and credit cards. It reduces the risk for the lender and increases the chances of getting loan approval with favourable terms and interest rates.

On the other hand, a low credit score may indicate that an individual has a history of late or missed payments, defaults, or high debt levels. It can lead to lenders perceiving the individual as high risk and may either reject the loan application or approve it with less favourable terms and higher interest rates.

How does your credit score affect your eligibility for a bike loan?

The table below shows the impact of credit score on your likelihood of getting a bike loan.

How to improve your CIBIL score?

Since your credit score plays an important role in determining your eligibility for the loan and the loan terms, here are some tips on improving your credit score so you can get a better deal:

Clear your dues on time: Late payments negatively impact your credit score. Ensure you pay your credit card bills, loan EMIs, and other dues on time to maintain a good credit history. Late payments can stay on your credit report for up to seven years, affecting your score and ability to obtain credit.

Regularly review your credit reports: Reviewing your credit report regularly can help you identify errors or discrepancies that may negatively impact your credit score. You can raise your query with the credit bureau if you notice any errors. On successful verification, CIBIL will rectify the errors if satisfied with the proof provided.

Avoid too many loan applications: Applying for too many loans or credit cards in a short period can have a negative impact on your credit score. When you apply for credit, lenders conduct a hard inquiry on your credit report, which can lower your score. Try to limit your loan applications to only those you need.

Maintain a low credit utilisation: Your credit utilisation ratio is the ratio of the amount of credit you have utilised on your credit card to your credit limit. You should ideally keep your credit utilisation at 30% of your credit card's limit.

Maintain a good mix of secured and unsecured loans: A mix of secured and unsecured loans can positively impact your credit score. A good credit mix shows that you can handle different types of credit and are responsible while managing your finances.

In conclusion

It really is a myth that a low CIBIL score will completely disqualify you from getting a bike loan. While having a good score certainly helps, lenders consider various factors when deciding whether to approve a loan application. By improving your credit score, you can increase your chances of getting approved for a bike loan and availing better loan terms. But remember, a low score is not the end of the road but rather an opportunity to take control of your financial health.