Are you dreaming of a new bike but worried that your low CIBIL Score might put the brakes on your aspirations? Poor creditworthiness can sometimes seem like a roadblock when you are looking to finance your dream two-wheeler. In this guide, we will cover the impact of a low CIBIL Score, tips to boost it, and explore how you can navigate the world of two-wheeler loans with a less-than-ideal score. Let us begin!
Your CIBIL Score
Your CIBIL Score is your credit score calculated by TransUnion CIBIL, India’s oldest credit information company. It is a three-digit number between 300 and 900 that summarises your credit history and takes into consideration the five key factors that influence your creditworthiness. These include your repayment history, your credit utilisation, the length of your credit history, your recent credit applications, and your credit mix. Most lenders would agree that a score of 750 or higher is ideal, allowing you to secure the best credit products at the lowest interest rates.
Impact of a low CIBIL Score on two-wheeler loan
Having a low CIBIL Score can throw a wrench in two-wheeler loan plans. Here is how:
- Higher interest rates: Lenders often charge higher interest rates if your CIBIL Score is less than stellar. This is because a low score signals a higher risk of repayment issues, and lenders need to protect themselves.
- Lower loan amount: With a low CIBIL Score, you might qualify for a smaller loan amount. Lenders might be hesitant to lend substantial sums to borrowers with shaky credit histories.
- Limited options: Not all lenders are open to risk. A low score might limit your lender options, reducing your chances of finding the best deal.
- Loan rejection: In some cases, lenders might outright reject your loan application because, with a low CIBIL Score, you appear too risky.
How to improve your CIBIL Score for a two-wheeler loan
Now that we know the kind of obstacles you will encounter, let us steer towards possible solutions. The good news is that your low CIBIL Score is not a permanent roadblock. You can work on enhancing your score by making certain changes to your credit behaviours and being consistent with them:
- Pay your bills on time: Consistently paying your bills in a punctual manner signals reliability to lenders and boosts your credit score. Late payments and defaults have the opposite effect. So, make sure you pay your credit card bills and loan EMIs in a timely fashion. If you typically struggle with this, consider setting reminders or automating your payments to avoid missing any due dates.
- Reduce your debt: High debt levels can drag down your CIBIL Score. Clearing off existing debts before applying for a new loan can help lighten the load.
- Keep your credit utilisation low: Do not max out your credit cards as it makes you appear credit-hungry, making lenders wary of lending to you. Instead, aim to maintain your credit utilisation below 30% to keep your score in good shape.
- Don't apply for too many loans at once: Every loan application triggers a hard enquiry on your credit report, which can lower your score. Apply for new credit only when necessary to keep your score steady.
- Maintain your old credit accounts in good standing: Do not close old credit accounts you have not used in a while. Instead, use them occasionally and keep them in good standing to maintain the length of your credit history and keep your credit utilisation low.
- Become an authorised user: Request a friend or family member with good credit to allow you to become an authorised user on their credit card. Their good credit habits will rub off on your credit score and help improve your credit standing.
- Take on a credit builder loan: A credit builder loan is a useful product for those seeking to build up their creditworthiness. The lender holds the loan amount until you complete the payments over the course of the loan tenure. Your timely payments help build up your score.
- Check your credit report for errors: Sometimes, your credit report might contain errors that are unfairly pulling down your score. Regularly check your report and dispute any inaccuracies that you find to ensure your score is always on the right track.
If you are looking for a companion to join you on this journey to build your creditworthiness to secure a two-wheeler loan, the Bajaj Finserv Credit Pass is your best bet. This CIBIL-powered tool comes with a personalised dashboard that provides a complete overview of all your credit accounts in one place, highlighting the factors that influence your score. This means you can track your Credit Health Report in real-time and track your progress with monthly CIBIL Score updates. Furthermore, interactive tools such as the Credit Score Simulator and EMI Calculator help you plan your credit-related decisions with greater confidence.
