Your friend recently bought a nice car with a bank car loan. Your neighbor did that a few months ago, as did your cousin. However, for some reason, you do not seem to be very lucky to get a loan for your car. Low credit rates may be the reason why banks are reluctant to lend you money.
What are credit scores and how does it affect my ability to get a car loan?
Banks use the credit score to assess your creditworthiness. The more is your credit score, the higher are your chances of getting a loan. CIBIL is a credit information company, with three points ranging from 300 (poor) to 900 (well). As a sixth rule, banks consider a CIBIL rate of 750 or more suitable for a loan. A score of 650 or less is considered too low to be a loan.CIBIL School is based on your payment history on all loans and credit cards. Here are some tips by Bank of Baroda Car Loan on how can you improve your credit score.
Step 1: Know your credit score: To improve your car loan score, you must first know your score. You can request your own online through the CIBIL website. Your school will be accompanied by a credit information report, and a compilation of your credit history.
Step 2: Check credit history: Read the credit information report carefully. Look at the mistakes. For example, you may have to repay a loan, but it does show that it is open to the report, or it may mean a loan you have never applied for.
Step 3: Report an error: If there is an error, CIBIL has a process to fix it.
Step 4: Practice Wisdom: If there is no error, and your CIBIL score is low, you will need to improve your credit eligibility.
CIBIL points and application for a car loan
Usually, when someone comes to the bank to finance his dream car, his loan is rejected even though he meets the most eligible process. One of the reasons the bank refuses to lend a car is bad credit i.e. the points are less than the minimum demand. This leaves applicants confused as to why they have such a low credit rating.
Here are some of the reasons for bad credit rating.
- Late payments: If payments to credit cards or loans are delayed from time to time, it is effective to reduce credit scores as it points to improper financial management.
- Outdated credit cards: Although credit card companies only require a minimum monthly payment to avoid late payments, the balance is still considered overdue. Constantly paying only a small amount lowers CIBIL scores.
- Payment error: Failure to make payments on any credit line i.e. credit card, mortgage or overpayment, etc.
- Rejected loans: If a car loan is rejected and another is applied for immediately after the cancellation, the second loan also has a greater chance of being lost leading to a reduction in credit scores.
- There are too many car loan applications: If car loan applications are made at multiple banks at the same time, they all end up asking for CIBIL customer details at the same time. This is considered a negative aspect and is effective in reducing credit scores.
How to Check Your CIBIL Report
CIBIL has provided an online site to help potential borrowers check their Information before reporting their car loan applications. It is a paid service; Currently, Rs.470 is charged for receiving this report. The steps for the same are:
- Apply for your credit results on the CIBIL website.
- Enter basic information such as name, identity details, and date of birth.
- Provide relevant contact details.
- Make a payment to complete the process.
- After the application process is complete, they will contact you and let you know your exact credit rating.
What is the Best CIBIL Rate for a Car Loan?
Banks and financial institutions have never announced the full potential of car loans. However, it is safe to assume that more than 600 points are good and 750 points or more are very good.