How to Check and Improve the CIBIL Credit Score for a Business Loan

Improve the CIBIL Credit Score for a Business Loan

The CIBIL score plays a crucial part in deciding your business loan eligibility. Financial institutions, including Non-Banking Financial Companies (NBFCs), and banks consider your credit score a mandatory condition before trusting you with financial lending for your venture. If you are searching for a loan for business, start with learning how to improve CIBIL credit scores.

To begin, check and make arrangements to improve CIBIL score. With a higher credit score, you are eligible for a higher business line of credit. Financial institutions provide larger loans on lower interest rates to people with credit scores of 750 or above. Your credit score indicates your transaction history, repayment track record, and suitability for a business loan.

What is CIBIL?

The Credit Information Bureau (India) Ltd. is the premier body for providing credit information reports for individuals and businesses. The body takes the financial and credit history from financial organisations and furnishes a credit score based on the data. The report is mandatory for your business loan consideration and approval.

How To Check Online CIBIL Score

Are you wondering how do I check my CIBIL score and how to improve CIBIL score in India? Please look at the following steps and find out your CIBIL score limit for a business loan application.

Steps to Check Online CIBIL Score

1. Visit the official CIBIL website.
2. Go to the “Get your CIBIL score” option.
3. Click on “Click here” and proceed further.
4. Insert your information, including full name, email ID, password, and ID proof options into the dropdown menu. After selecting your ID proof, type your PIN code, contact number, and date of birth. All the information should be accurate and authentic because any mismatch could affect the CIBIL rating scale.
5. Check and verify details. Once done, click “Accept and continue” for the next step.
6. A one-time password (OTP) will come on the registered mobile number. Enter the number and choose “select.” The OTP should never be shared with anyone and must be entered correctly in the given time.
7. After this, click on “Go to dashboard” for your CIBIL score.
8. Once the registration is done, you will be redirected to the landing page.
9. In the last step, go to the “Member Login” and view your CIBIL credit score.

That’s all! With a good internet connection and appropriate documents, you will get a credit report within a couple of minutes. These steps clarify how to check my CIBIL for business loan applications.

Importance of Good Credit Score for a Business Loan

Financial institutes and banks profile a person’s or company’s loan eligibility through a credit report. A good credit report has numerous benefits for the application and approval of loans for new business.

A CIBIL score ranges between 300 and 900. Credit scores at 750 and above are good because they indicate your credit history, loan repayment record, and capacity. NBFCs and banks offer lucrative interest rates and loan amounts for good credit reports.

Faster Approval

People get the business loan application approved faster with a good credit score. NBFCs and banks prefer loan applications with reliable track records for repayments.

Higher Loan Amount

If you have a history of taking a loan for business expansion, furnishing, or office fixtures with an on-time repayment track record, you will have a good credit score. Lenders will trust you with a significant loan amount, and you can efficiently fulfil your business goals.

Benefit on Interest Rates and Tenure

People with good credit scores get flexible offers on interest rates and tenure. Lending institutes trust you for timely payment and provide affordable interest rates on a business loan.

Choice of Multiple NBFCs and Banks

Leading NBFCs such as FlexiLoans prefer people with impressive credit scores to provide loan offers. If you have a remarkable CIBIL score, you will get multiple lenders. Choose the best one at your convenience.

Other Benefits of a Good CIBIL Score

Easier Documentation

If the borrower has a good track record of paying loans on time, lenders approve the application with easier documentation. Though they do not skip any formalities, your chances of approval increase with your trust factor.

Approval for a Larger Sum of Money

You can get a large sum of money for business purposes with payment history per scheduled timelines in the past.

We have discussed CIBIL, how does CIBIL work, the process to check online CIBIL score, and the importance of good credit score for best deals on business loans with faster approval.

Therefore, we can now delve into how to improve CIBIL score instantly. Let’s go into the details of efficient ways to improve CIBIL scores and significant determinants.

How to Improve CIBIL Score for business loan

One of our most frequently asked questions is, “how can I increase my CIBIL score”? The best ways to do so are listed below.

Credit Utilisation Ratio

Keep your revolving credit limit within 30%. The credit utilisation ratio is the percentage of credit that you, as a borrower, used for the loan. It is a crucial factor for credit score improvement.

Maintain Older Accounts

If you have maintained old accounts for financial transactions, it will improve your credit score. Financial exposure and association with older accounts build trust among lenders and a good CIBIL score.

Pre-payment Track Record

Keep payments on schedule per agreement with NBFCs and banks. Do no delay or make partial payments as they adversely affect credit scores. To improve your score, always pay on time.

Full EMIs on Time

Missing dates for equated monthly instalments on credit cards and loans cause penalties, and eventually, low credit scores. If you want to know how to improve CIBIL score, never miss deadlines. Always pay instalments on the scheduled day or before the due date.

Do not Apply to Many Places

If you have a habit of applying for business loans with multiple NBFCs and banks, refrain from it to improve your credit score. Borrowers should go for soft instead of hard inquiries because it could affect credit scores negatively.

• Soft Inquiry

Soft inquiries are more of the casual check of the credit score. They do not affect credit scores.

• Hard Inquiry

Hard Inquiry is more specific, mostly on the company website. If you do a lot of hard inquiries, your credit score will go down. Lenders check these inquiries, and therefore, it is advisable not to do hard inquiries to keep an impressive CIBIL.

Multiple Cards and Loans

Credit bureaus consider people with multiple debt instruments as high-risk individuals. Several people are in the habit of taking cards and loans for their homes and businesses. Excessive credit puts you in the high-risk category.

To improve and maintain a good credit score, you should keep only essential debt instruments and prioritise the needs of the business.

How to Improve CIBIL Score After Default

It is not rare to default on business loans due to varied reasons. If you want to know how to increase CIBIL score after default, here are some useful tips for improving your credit score.

Check Troubled Accounts

To begin with, go through all accounts and check credit scores to identify your problems.

Pay Dues in Full

Pay credit card dues and loan outstanding in full. It is not advisable to ask for a “settlement” because once the lender mentions these terms with your loan account, your chances of getting new business loans become difficult.

Convert Credit Card Dues into a Personal Loan

The defaulter can apply to convert dues on credit cards into long-term personal loans. Though credit cards charge high interest rates, it will be easier for you to pay and close the loan account.

If an individual follows these steps, their credit score is bound to increase. Further, an improved credit score will help get a business loan with convenient interest rates, longer tenure, and a higher loan amount.

Determinants of Credit Score for a Business Loan

Here are the crucial determinants for credit scores you should consider for better chances of getting the desired business loan from leading NBFCs such as FlexiLoans and banks.

Impressive Repayment Record

Repayment of previous loans, debt, and bills cover a significant portion of the credit score. A good credit score reflects how well you paid your EMIs and dues in the past.

If you delay bills and payments, the credit report will not improve. Keep an impressive payment history for good CIBIL scores.

Irresponsible Financial Behaviour

A person’s spending habits, debt instruments, expenses, and frequent use of credit beyond the credit utilisation limit are crucial factors that affect CIBIL.

Prioritise the goals and spend wisely. Do not overspend the credit limit; keep it within 30% because if you are not organised in financial decisions, lenders will classify you as a high-risk borrower.

Debt Instruments and Inquiries

Restrict your cards and loans to the most critical purposes. Too many applications and cards make you a high-risk candidate who does everything on credit.

If you want to make inquiries about loan schemes, check them on third-party websites. Please do not make frequent hard inquiries for a good CIBIL score.

Positive Credit History

Lenders prefer applications with long-term financial exposure and transparency in transactions. Your payments should be consistent and without any default or delays.

If you have old accounts with positive transaction history, it would be highly beneficial for a favourable credit score for your business loan application and approval.

Other Factors

• A Mixture of Secured and Unsecured Loans

Secured loans are loans against collateral that might be property or houses. Unsecured loans are collateral-free.

• Annual Credit Report

The business loan needs planning for years. To avail of a loan for your business, check your credit report at least once a year. It is important because you can review any areas that need correction for improvement in credit scores.

Conclusion

A business loan for your dream venture needs a good credit score of 750 and above. The application can take weeks, depending upon your credit history, CIBIL score, business type, and several other factors. Your efforts for improving your credit score will start being impactful after a couple of months. Therefore, you need to apply the appropriate tips and methods consistently. Patience is the key to an improved CIBIL score and business.

Frequently Asked Questions

• How to Improve my CIBIL score?

The CIBIL score depends on your financial history, debt instruments, track record of pre-payments, and liabilities. To improve it, keep your transactions transparent, pay EMIs on time, and avoid hot inquiries.

• How much time it takes to update CIBIL report?

CIBIL reports take around four to 12 months to update. It depends upon your consistent payment and good credit behaviour throughout.

• How to check company CIBIL score?

A company CIBIL score is the credit score for availing loans for expansion, acquisition, and other business purposes. You can check it in the same way as an individual credit score.

• How much time it takes to improve CIBIL score?

If an individual or company keeps good credit behaviour consistently over the period with transparent transactions, the CIBIL score can improve within four to 12 months. Any figure above 750 is considered a good CIBIL score limit.