Career Opportunities And Credit Score Evaluation: Essential Insights You Should Be Aware Of

Understanding the relationship between your CIBIL score and career opportunities is important. This is true for both aspiring entrepreneurs and job seekers in India. In this blog, we will explore the impact of credit score on – securing a business loan and landing your dream job. We will also review actionable tips to enhance your financial literacy.

Understanding Credit Score

A credit score is a numerical representation of an individual’s or business’s financial health and creditworthiness. In India, a widely recognized score is the CIBIL Score, which ranges from 300 to 900.

factors affecting credit score

• Payment History: This is the most critical factor. Timely repayments of loans, credit card bills, and other financial obligations positively impact your score. Late payments, defaults, or bankruptcies can damage it.
• Credit Utilisation: This refers to the amount of credit you’re using compared to your credit limit. A utilisation rate below 30% is preferable.
• Length of Credit History: A longer credit history provides more data for lenders to assess your financial literacy and debt management skills.
• Credit Mix: Having a diverse mix of credit types (e.g., credit cards, term loans, line of credit) can positively affect your score.
• New Credit Inquiries: Frequent applications for new credit can negatively impact your score, as this indicates financial distress.

Credit Score Range

• Excellent (750-900): This range indicates exceptional creditworthiness. Individuals and businesses in this bracket are likely to get the best interest rates and terms for loans. SMEs may also qualify for collateral free business loan.
• Good (700-749): A good score suggests responsible credit management. Lenders will likely approve you for loans, but may not always offer you the best rates
• Fair (650-699): This range may lead to loan approval, but often with higher interest rates. For businesses, it might affect business loan eligibility or terms.
• Poor (600-649): Obtaining credit becomes challenging in this range. You may face higher interest rates and stricter terms for any loans approved.
• Very Poor (300-599): Lenders rarely approve credit applications in this range. Significant improvements in debt management and financial literacy are necessary.

Importance of Credit Score in Career Opportunities

While mostly associated with lending, credit score influences your career opportunities in the following ways –

1. Employer Evaluations

Employers in financial services evaluate a candidate’s CIBIL as part of the hiring process. Employers perceive candidates with higher score as reliable and less likely to engage in financial misconduct.

2. Background Checks

Credit checks are becoming more common in background verification processes. Industries operating with sensitive data or high-value transactions prioritize candidates with good credit histories to reduce financial risks.

3. Roles with Financial Responsibility

Positions that have a role to handle finances, budgets, or client accounts require candidates to demonstrate financial literacy. A good score can serve as evidence of this skill and influences hiring decisions.

4. Creditworthiness in Professional Settings

Candidates with good scores find it easier to access corporate credit cards, business loan, or even certain promotions that involve financial management responsibilities.

5. Client-Facing Roles

Candidates in client-facing positions, such as wealth managers, financial advisors, or real estate agents, find that a good score enhances their credibility with clients. Clients view financial stability as a positive attribute in those who provide financial advice or manage their investments.

6. Career Progression

Your CIBIL also influences career progression. Employers consider promotions or leadership roles for candidates who exhibit strong financial management skills, often reflected in their credit histories. This is particularly relevant in senior management positions where financial responsibilities are significant.

7. Impact on Employee Benefits

Employers consider creditworthiness when determining employee benefits packages, such as insurance premiums, retirement contributions, or access to company stock options. A good score leads to more favorable benefit terms.

Credit Score Evaluation for SME Loans

Lenders use this score as a key indicator of a business loan applicant’s financial health and creditworthiness. 

Evaluation Criteria

Lenders consider several factors as given below when evaluating this score for MSME loan. 

• CIBIL Score: A score of 750 or above is generally considered good for business loan applications.
• Credit History: Lenders assess the length and consistency of credit history.
• Debt Management: They assess how well the business has managed existing debts.
• Financial Literacy: Demonstrated understanding of financial principles can positively impact evaluation.
• Loan Repayment Track Record: Lenders view timely repayments on previous loans favorably.

Impact on Loan Approval

This score influence both loan approval and interest rates in the following ways –

• Loan Approval: A higher score increases the chances of loan approval, especially for collateral free business loan. FlexiLoan offers business loan upto ₹2.5 crore against your invoices that can fulfill any urgent working capital loan requirement.
• Interest Rates: Better scores often lead to more favorable interest rates on MSME loan.
• Loan Tenure: Lenders view higher scores as indicators of lower risk. This makes them willing to offer extended repayment periods. Longer tenures mean lower monthly payments, which can improve cash flow for your businesses.

Let us look at an example where two SMEs with a CIBIL of 750 and 580 respectively apply for ₹5,00,000 business loan. Terms and conditions of business loan may look as below for them.

	CIBIL = 750	CIBIL = 580
Down Payment	10%	30%
Approval Time	1 Week	6-8 Weeks (If approved)
Interest Rate	6% APR	18% APR
Repayment Term	7 Years	3 Years
Collateral Requirement	No	Yes

Improving Credit Score

• Pay Bills on time: This component has 35% weightage in this score calculation. Each time you pay a bill on time, it creates a positive entry in your credit report. On the other hand, late payments can stay on your credit report for up to seven years. By paying on time, you avoid these long-lasting negative marks.
• Reduce Credit Utilisation: Credit utilisation is the percentage of your available credit that you’re using. For example, if you have a ₹50,000 credit limit and a ₹15,000 balance, your utilisation is 30%. Credit scoring models view lower utilisation ratios favorably. While there’s no universal perfect utilisation rate, many experts suggest keeping it below 30%.
• Diversify Credit Mix: Credit has 10% weightage in this score calculation. Having a mix of credit types (credit cards, term loans, etc.) suggests you have a more balanced and mature financial profile. This can positively impact your creditworthiness.
• Avoid Multiple Hard Inquiries: A hard inquiry is a formal review of your credit report by a lender when you apply for credit. Each hard inquiry causes a small, temporary drop in your score (usually around 5-10 points). Multiple hard inquiries in a short period can make you appear risky to lenders, as it may suggest you’re desperately seeking credit or taking on too much debt at once.
• Maintain Old Credit Accounts: The length of your credit history accounts for about 15% of your score. Older accounts increase the average age of your credit history. Credit scoring models view this positively.
  For example, you have a credit card for 10 years. This card was one of your first, and you don’t use it much anymore because you’ve got other cards with better rewards or lower interest rates. It is advisable not to close this card even if you are not using this often.
• Separate Personal And Business Credit: By using business credit cards and loans instead of personal ones for business expenses, you can lower your personal credit utilisation ratio. Also, having a separate business credit line increases your total available credit, which can improve your overall score.

Conclusion

As we’ve explored, your CIBIL not only impacts your ability to secure loans and favorable interest rates but also plays a significant role in shaping career opportunities. From influencing hiring decisions to affecting job responsibilities and benefits, a strong score can open doors in various professional ways. For SMEs, a healthy score can determine the success of business loan applications, interest rates, and overall loan terms. By implementing the above-discussed strategies you can not only expand your career prospects but also increase your chances of business success.

FAQs

Q1. Can CIBIL be Negative?

Ans: The CIBIL score is widely used in India. It ranges from 300 to 900. 300 is the lowest possible score, while 900 is the highest. There is no provision for negative scores in this system.

Q2. Can CIBIL be corrected?

Ans: Yes, you can correct a CIBIL if there are errors in the credit report. The process to get it corrected is explained below.

1. Look for incorrect personal information, accounts that don’t belong to you, incorrect payment statuses, or outdated information.
2. Collect any documents that can prove the inaccuracies in your report, such as bank statements, loan repayment receipts, or identity proof.
3. Contact CIBIL (TransUnion CIBIL) to file a dispute. You can usually do this online through their website, by mail, or sometimes by phone.
4. CIBIL will investigate your dispute, which takes about 30 days. They will contact the relevant financial institutions to verify the information.
5. Once the investigation is complete, CIBIL will provide you with the results. If they resolve the dispute in your favor, they will update your credit report accordingly.

Q3. How CIBIL is calculated?

Ans: The Credit Information Bureau (India) Limited (CIBIL) collects credit-related information from banks and financial institutions. We highlight the factors that drive this score calculation below.

Factor	Weightage
Payment history	35-40%
Credit utilisation	25-30%
Length of credit history	15-20%
Types of credit	10-15%
Recent credit inquiries	10%

Q4. What CIBIL is Good?

Ans: Lenders consider a score above 700 a good score.

Q5. When Is CIBIL Updated?

Ans: Banks and financial institutions report customer credit information to CIBIL once a month. Due to the monthly update cycle, any changes in your credit behavior (like paying off a loan or missing a payment) may not immediately reflect in your score. It could take 30-45 days for these changes to appear in your credit report and affect your score.

Q6. Where to check CIBIL Score?

1. You can visit the TransUnion CIBIL official website (www.cibil.com) and request your credit report and score. This typically involves a fee.
2. Some banks offer free CIBIL checking through their net banking portals for their customers.
3. Several fintech companies such as Paisabazaar, BankBazaar, and CreditMantri offer free CIBIL checks, often in partnership with CIBIL or other credit bureaus.
4. Some credit card issuers provide your CIBIL on your monthly statements.

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