Last update: March 14, 2024 2:19 PM IST
Car loan (Photo: Shahrukh Shah/ News18)
Getting a CIBIL credit score takes time. It often takes 18 to 36 months or more of credit to achieve an acceptable credit score.
Maintaining a high CIBIL score is important when applying for various types of loans such as personal loans, home loans, car loans, etc. A high credit score indicates reliability and responsible credit behavior, which results in lower interest rates on vehicle loans offered by top-tier banks and non-banking finance companies (NBFCs). To get a car loan or any other type of loan, an individual must have a good credit score.
First, let’s find out what CIBIL score is.
Your CIBIL score is a three-digit summary of your credit history, ratings and reports ranging from 300 to 900. The closer your score gets to 900, the better your credit rating will be. When you apply for a loan, the bank will review your credit history and generate a credit report to assess your creditworthiness.
A borrower's credit history is a record of their debt repayment history. A credit report is a summary of a borrower's credit history from a variety of sources, including banks, credit card companies, collection agencies, and government agencies. Additionally, a borrower's credit score is generated by a mathematical algorithm that evaluates credit data to determine creditworthiness.
Getting a CIBIL credit score takes time. It often takes 18 to 36 months or more of credit to achieve an acceptable credit score.
Coming back to the car loan story, the minimum CIBIL score required for a car loan depends on the lender's criteria and other considerations such as income, current debts, job security, down payment amount, etc. Although it is not a rule, most lenders prefer borrowers with a CIBIL score of 700 or above to qualify for a car loan.
A higher credit score can help you lower the interest rate on your car loan, saving you money over the life of the loan. But while a better credit score is desirable, it's not the only factor lenders consider when evaluating your loan application. To evaluate your creditworthiness, they will consider your income, employment stability, debt-to-income ratio and other criteria.
You can still get a car loan if your credit score is below 700, but you may have to pay a higher interest rate or accept stricter lending restrictions. In these situations, you can improve your credit score by making payments on time, reducing existing debt, and maintaining good credit utilization before applying for a car loan.