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The very first criterion which determines the eligibility for any type of loan is a credit score. The credit score can be defined as a three digit numeric summary of the entire credit history of an individual which is generated by CIBIL. CIBIL stands for Credit Information Bureau, India Limited. This information is based on the monthly information that is provided to CIBIL by the various banks and the different financial institutions. Generally, an individual’s credit score appears between the range of 300 to 900.
When an individual applies for any kind of loan and submits the filled loan application form to a bank, the very first thing that the bank will check is the credit score of the individual and the credit history. If the person has a bad credit history and the credit score is relatively low, then the bank may directly reject the loan application. Rather, if the person has a good credit score, the bank would immediately pass the loan application and go ahead for further formalities. Provided that the CIBIL score or credit score is the primary and major deciding factor in order to help the person get the loan application processed, this is very important to know the factors which affect the credit score of an individual and take the necessary steps accordingly to improve the same if it is below the expectation.
The digital payments are said to be the future of transactions in our country India. The young and the old Indians are slowly getting accustomed to this norm aspect. Now more & more people are choosing to use their plastic money over hard cash or real currency. No matter how big the volume of the transaction amount is, when given an option, the people will generally opt to use the credit cards for making the payment.
Some of the interesting reasons to do so are mentioned below:
Let us take an example to understand this in a better way. The Newlywed Meesha observed, that “one need not invest a large amount of money in costly personal loans or to mortgage an asset with the bank in order to compensate for the requirements.” At the time of buying new furniture for their house, Raj and Meesha had been contemplating taking a personal loan that may have costed them to be around 19%. Rather they used their credit card for paying off their bills and other expenses, earned reward points and converted the large value transactions to easy EMIs at a relatively lower rate of 14%.
All that glitters is not gold. This is a very true adage, especially in the case of EMI which affect an individual's CIBIL rating or credit score. The factors going against opting for an EMI are as follows:
Thus, converting a large transaction to an EMI is, undoubtedly, a very alluring option. But one must consider that whether it is the best option or not. Thus, one can only conclude from the above information that one must never opt for an EMI without actually calculating the real-time benefits of the transaction. One must ensure if the benefits are superficial or real. Is it alright for the individual to block the credit limit for such a long period of time? Or would he rather keep it free for any of the future use? If one does not convert a large amount of money to EMI, can he/she arrange for any other cheaper funds source? All of these activities definitely affect the CIBIL score of the individual. Also, if the individual skips to repay any of the EMIs, it further decreases the CIBIL score. So one must be very cautious while opting for an EMI on a large transaction which is above Rs.5000. This is because opting for an EMI on a credit card does affect the CIBIL score of the individual to a great extent in the long run. Also, all the future borrowings are affected due to a single EMI that affects the CIBIL score.