Ways to Improve Your CIBIL Score when Applying for a Business Loan

Ways to Improve Your CIBIL Score when Applying for a Business Loan

CIBIL Score vouches for your credibility even if you own a business or a salaried professional.

Meaning?

An individual being the head of a multi-million dollar corporation may have defaulted on his/her credit repayment. This makes his/her credit score decrease considerably.

You, on the other hand, maybe the head of an SME (Small and medium enterprise), but your ethical practices can get you a score substantially higher than even the multi-millionaire.

What does that mean?

A higher credit score would make you eligible to apply for a business loan and have it sanctioned. Banks and NBFCs (Non-banking financial companies) look for businesspersons with an impressive credit score as one of their criterion for giving business loans.

This credit score ranges between 300 to 900, and you need to ensure it remains on the higher side. Such a score would mean, you have a stable income, calculated expenses, and the ability to repay a loan.

Don’t have a good enough? Don’t worry.

There exist several ways in which you can increase this credit score. Following these steps would ensure you turn up your score and become eligible for a business loan.

How to improve CIBIL Score?

1. If rejected, stop applying for loans

One of the prime mistakes that borrowers make is to apply for loans even after getting rejected continually. Whenever an individual gets denied for a loan or a credit card, it gets recorded in their CIBIL Score.

Next, if he/she goes to another lender and applies for a loan, they will receive a poor credit report and may decline the application.

So, what can you do?

The smart move here would be to seek small loans and repay them within time. Successful payment of multiple loans can help you increase your CIBIL score considerably.

2. Ensure timely repayments

The next step in how to improve CIBIL score - always ensure that you pay your loan instalments, credit card dues, and EMIs in time. Failure to do so will result in your score going down.

With a loan, if you are encountering difficulties in paying your instalments, you can approach the bank and request them to modify its structuring.

When it comes to credit cards, make sure you pay the entire due amount and not the minimum required. Furthermore, try to avoid reaching the credit limits of your card.

3. Abide by credit limits

As mentioned above, you should attempt never to cross your credit limits. 

You must always ensure that your total credit utilised in accordance with the sanctioned amount remains below 30 to 40%.

4. Check your credit score regularly

Checking your CIBIL Score will keep you updated with all the latest developments in your credit history. 

Regular checking will enable you to stay updated with your delays and defaults on your credit card or repayments, if there exists one.

5. Keep the volume of applications limited

Every time you apply for a credit card or a loan, the bank or NBFC will inquire about your credit score. 

With each inquiry by a financial institution, your score will come down and also show that you are credit hungry.

So, what can you do?

Never apply for credit with multiple lenders frequently; keep the number of applications low and maintain a healthy score.

6. Keep your borrowings minimal

Still wondering how to improve CIBIL Score? Keep the number of loans to a minimum. Avoid taking multiple loans at the same time and do not borrow unless absolutely necessary.

Following the points mentioned above can help you get your CIBIL Score up within a span of 4 months to 1 year. After that, you will be eligible to apply for a fresh loan with banks or NBFCs. While banks can make this process a bit complicated, NBFCs like Bajaj Finserv, on the other hand, make it simpler with their pre-approved schemes.

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