CIBIL (Credit Information Bureau (India) Limited) is a company which is engaged in managing the records of all the credit-related activities of companies as well as individual users, including credit card and loans. CIBIL score is a 3-digit numeric summary of your credit history and ranges from 300-900. The closer you are to 900, the higher are the chances of your loan application getting approved. A credit score is a reflection of how responsibly you can handle your credit payments. Feeling your gold loans or credits will affect your credit score. If you think your loan payments carefully, it will improve your credit score, but in case of any negligence, your credit score automatically declines.
Whenever you apply for a gold loan, it shows a credit inquiry. Too many credit inquiries in a short period may indicate that you are a credit hungry individual or are asking for more than you require, neither of them is a good sign.Once the lender approves a gold loan, then you need to repay your loan as per the decided terms and conditions. Making loan payments before or on time is said to have a good credit score. Borrowers who repay their loan EMIs on time tend to have a good credit score.
Loan default is when you fail to meet the gold loan repayment obligation as per the contract signed. Even a day’s delay can affect your credit score negatively.
Currently, a CIBIL score of 750 and above is considered ideal for borrowers to get loans from major finance companies and banks. Hence, it is most important to have a higher CIBIL score for easy, affordable, and fast loan approval.
In case you find your CIBIL score to be lower than required, then there are certain steps you can take to ensure it gets better, such as:
Timely repayment of all outstanding credit card and loan amounts,
Ensuring an ideal mix of unsecured and secured loans in your name,
Making sure to keep your credit card amount well within the maximum limit, on an average and
Avoiding multiple credit cards and loans, especially when not expressly required.
Let us check how a gold loan can affect your CIBIL score, and what makes it better than the rest.
Loan repayment capability: Experts advise you to opt for a gold loan only, and only, if you have a regular source of income which is more than sufficient to repay the gold loan amount, without affecting your regular budget and expenses noticeably. Ensuring that you have full ability to easily make loan repayments with punctual EMIs is of utmost importance to ensure a better CIBIL score.
The current value of gold: It is highly advised to check the gold loan per gram in the market before deciding the time for applying for a gold loan. In a situation, if you are unable to repay the loan amount and the lender is forced to sell your collateral gold articles, the compounding gold loan interest rate combined with the depreciated market value results in the not only loss of value of your collateral, but also adversely affects your CIBIL score. The lender will not update your loan status on the CIR as ‘Clear’; rather it would be stated as ‘Settled’, which is a down-marker for CIBIL score.
To ensure a high CIBIL score through gold loans, there are 3 most important steps to be followed:-
Swift repayment
Adjust repayment
Avoiding collateral auction
With these three simple steps, the borrower can ensure that he never defaults on the repayment of the gold loan and prevents the CIBIL score to affect negatively.
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