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CIBIL Score for Business Loan

  • 08-Jun-2022
CIBIL Score for Business Loan

A CIBIL Score (Credit Information Bureau Indian Limited) plays a significant role in the lender’s decision to offer a loan. Banks use credit scores to determine the possibility that an individual has to pay back the borrowed amount timely.  

It is a three-digit number that ranges from 300 to 900 which reflects the creditworthiness of the borrower. It is based on the repayment history, total levels of debt, number of open accounts, credit history, and many other factors.   


How to Improve a CIBIL Score for a Business Loan? 

CIBIL Score is an important part of credit history. If a score is less than 750, then it will be a curse for those who are looking for a business loan on an urgent basis. But it is just a number you can improve by focusing on the factors mentioned below and get a loan without any further delay.  


Pay Your Monthly EMI on time  

Timely repayments are one of the important factors that affect your credit score. If you have any current monthly installments or EMI payments for a running purchase, make sure that you pay them on time as it enhances your creditworthiness. 


Review Your Credit Score  

Review your score over a while, because sometimes lenders delay in updating the score. They might make mistakes like gathering false information. 

Thus, there are chances of your repaid loan that are not updated on the report. So, it is better to check your score regularly and if you find any mistakes, you can ask them to modify them.  


Pay Business Bills on Time  

Paying back your bill on time is also a crucial factor in improving your CIBIL Score for a business loan. Late or due payments have a negative impact on your credit score.  


Avoid Taking Multiple Loans  

Do not apply for multiple loans if you don’t have enough funds to repay them, as too many loan applications or rejected applications are noticed as a negative factor as it leads to a lower credit score.  


Avoid Multiple Loan inquiries 

Whenever you apply for a loan, banks will do a detailed investigation into your credit history. Your CIBIL Score will suffer if you have too many hard inquiries. Whenever you quote a request, the lender raises an inquiry about your credit history as part of the loan approval process and this type of inquiry hit the your score hard and lowers your credit rating.  


CIBIL Score RangeDefination
300 to 549 - 
  • Poor CIBIL Score
  • Payment defaults
  • High credit exposure
  • The behavior of irregular repayment
  • The substantial risk of turning into a defaulter
550 to 649 - 
  • Fair CIBIL Score
  • Past due payments of EMIs
  • Multiple credit queries
650 to 749 - 
  • Good CIBIL Score
  • Lower risk of turning into a defaulter
  • Long credit history
  • Eligible to get a loan
  • Responsible repayment behavior
  • Have to pay higher interest rates
750 to 900 - 
  • Excellent CIBIL Score
  • Clean credit report
  • High negotiation power
  • No unpaid dues
  • No defaulted payments
  • Lower rate of interest
  • Payment of bills on time
  • Responsible credit handling


Benefits of a CIBIL Score 

A good score offers you to avail various benefits over those having a low CIBIL Score. You are facilitated to the following benefits if you have a good CIBIL Score. 

Better terms on loan products & lower interest rates  

Having an excellent credit score is one of the major benefits as lenders provide you loans at lower interest rates. You can also get many other benefits on eligibility and processing fee to get a high loan amount. 

Suitable for a pre-approved loan offer  

An individual with excellent CIBIL Score is eligible to avail pre-approved loan offers. Usually, pre-approved loans are offered to the existing borrowers that have a good repayment or credit history.  

Enhance your chances of loan approval 

If you have a good CIBIL Score, then the risk is low, and the chances of loan approval are higher. 


Benefits of Maintaining High Credit Score  

CIBIL Score is not the only thing that banks look at when applying for a loan, maintaining a good score comes with many benefits which include - 

  • High chances for the approval of loan applications, as a high score shows higher creditworthiness and lower the risks for the banks.
  • Concession on processing fee and other charges.
  • You can get a higher loan amount.
  • You can avail quick and easy approval for a loan.

 Also Read: Top 5 Benefits of Having a Credit Score Above 750


How Your CIBIL Score is calculated? 

Most probably, there are three credit reporting agencies that update, report, and store the credit history of a consumer. Here are five factors on the basis of which the CIBIL Score is calculated are given below -  

  • Payment History - 35%
  • Credit Utilization - 30%
  • Credit History Length - 15%
  • Credit Mix - 10%
  • New Credit - 10%


Importance of Checking Credit Score  

A credit score is the first impression to the lending institution about the repayment behavior of your loan. This is the reason that lenders check your credit score while applying for a business loan.  

Factors that matter the most in evaluating the score are - 

Interest rate – Many banks, NBFCs, and financial institutions provide a lower interest rate to the borrower with a higher credit score. 


Credit approval – Borrowers with good CIBIL i.e., 750 or above tend to avail loans easily and have more chances for quick approval of their loan than those who had a low or bad score.  


Types of loans – Those who have a good CIBIL can get an extensive offer for their loans from several financial institutions and banks. Whereas this facility is not provided to those who have a bad score. 


What Hurts Your CIBIL Score? 

There are various factors that can hurt your CIBIL Score - 

  1. Being late on credit payments.
  2. Ignoring due payment on loans.
  3. Applying for multiple loans within a short period makes your CIBIL Score down. Thus, it is advisable not to apply for multiple loans.
  4. If there is any error in the credit report and you are failed to fix it, then your CIBIL Score may hurt.


Tips to Maintain a Good Credit Score  

Given below are some tips to follow that will help you in maintaining a good score - 

  • Make timely bills and monthly payable EMI payments.
  • Manage your credit utilization ratio.
  • Avoid defaulting on payments.
  • Avoid applying for multiple loans within a short duration.
  • Maintain a mix of secured loans and unsecured loans.
  • Keep away from making many credit inquiries.
  • Monitor your guaranteed, joint accounts, and co-signed monthly.
  • Check your credit report regularly.

Also Read: Top 5 Startup Business Loan Schemes by Indian Government


Difference Between Credit Score and Credit Report 

The credit report has all the detailed information on the past and current credit agreements that you hold.  A credit score is related to a grade that is given to your credit report.  
It includes student loans, mortgages, inquiries on credit history, and many more. It is a three-digit number that generally ranges from 300 to 900. 
The credit report reflects your credit management.  The credit bureau assigns a credit score which is based on your credit history. 
It provides an outline of how much you owe creditors over an extended period. The report is also similar to the public records against you, such as bankruptcy filing, court judgements, etc... A high credit score shows that you have a minimal risk of availing a loan and seem to be more likely for the approval of a loan. 


List of Credit Information Companies  

Equifax – It is a Credit Information Company (CIC) that was founded in the year 1899 in Atlanta and in 2010 it got a certificate of registration in India by the Reserve Bank of India. It is one of the oldest CIC in the USA. It gives credit information for the applicant as well as businesses.  

Equifax is associated with several banks and financial institutions that assist the company in assessing the credit reports. The company charges Rs. 138 as a fee for a basic credit report and Rs. 400 for a credit score.  


Experian – Experian Credit Information company was established in the year 2006 as a joint venture between various banks and lending institutions in India. It conducts the evaluation of credit reports of the applicants and the companies. The company charges Rs. 399 credit score and Rs. 138 for the credit report. 


High Mark Credit Information Services (CRIF) - CRIF was established in the year 2005 in Mumbai. It not only gives credit information or reports to the individual but also caters to the borrower segment like commercial borrowers, Small Medium Enterprises (SMEs), and retail borrowers. The company charges a nominal rate for the credit report.  


CIBIL – The Credit Information Bureau Limited (CIBIL) was established in the year 2000. It is the first Credit Information Company (CIC) in India. The company maintains a record of repayment on loans of the borrowers. It provides a credit score rating that ranges between 300 to 900 where the score from 750 or above comes in an excellent category. This score plays a significant role when it comes to the approval of loans. The company charges Rs. 550 for a CIBIL report. 


Factors Affecting CIBIL Score 


Multiple inquiries – If the borrower has numerous inquiries, then they seem to be credit hunger. Lending institutions are judicious about the approval of loan applications for such borrowers. 


Repayment history – Overdue or default payments on your monthly EMI will have a negative impact on your credit score. It is one of the crucial factors to assess in determining your score.   


Number of loans applied for and approved – The credit bureau will have detailed information on loans applied before and the no. of loans approved. If your record shows many existing loans, then it may affect your score.  


Credit utilization – Over usage of the credit appears that an individual is highly reliant on credit. However, these individuals cause the rejection of a loan. Thus, the lender required a credit usage ratio lower than 30%. 


Duration of credit history – The time period of a credit history is given to the borrowers by the lending institution to pay back the borrowed amount of the loan that the borrower has taken from the bank.  


Errors in a credit report – Fault in a credit report are the common factor like wrong personal details which has a negative impact on credit score.   


Types of credit – There are 3 types of CIBIL Scores i.e., installments, revolving credit, and open credit. It allows the borrower to purchase goods and services with the borrowed amount. 


How do I Check My CIBIL Score? 

Financeseva provides you excellent way to check your credit score. You just have to follow the steps listed below - 

Fill out the form present on your screen. You will require to enter the following details -  

  • Business name
  • Address line 1 and 2
  • Locality
  • City
  • State
  • Postal
  • Mobile Number
  • E-mail address
  • Product category
  • Relationship type
  • Full name of the Director
  • Date of Birth
  • Director's mobile number
  • Director's Aadhaar number
  • PAN Card
  • Voter ID
  • Driving license
  • Ration card

After filling in all the above details click on finish. 

Thereafter, an OTP will be sent to your mobile number. 

Enter OTP and then the score will be shown on your screen. 


Compare Business Loan Interest Rates Provided by Top Banks and NBFCs 

Bank name  Interest rate (p.a) Processing fee 
Aditya Birla 18.00% 2% 
Ashv finance 20.00% 2% 
Axis Bank 18.00% 2% 
Capital float 25.00% 2% 
Deutsche Bank 18.00% 2% 
Edelweiss Finance 22.00% 2% 
Federal Bank   18.00% 2% 
Fullerton India 19.00% 2% 
Growth Finance 25.00% 2% 
HDFC Bank 17.00% 2% 
Hero FinCorp   19.00% 2% 
ICICI Bank 17.00% 2% 
IDFC First Bank 18.00% 2% 
Indifi Technologies 23.00% 2% 
Lending Kart 18.00% 2% 
Magma Fincorp 17.00% 2% 
Neogrowth 22.00% 2% 
RBL Bank 18.00% 2% 
Standard Chartered Bank 15.00% 2% 
State Bank of India 11.10% 2% 
Tata Capital 19.00% 2% 
Yes Bank  18.00% 2% 

Financeseva allows you to check your CIBIL Score within a few minutes, and you can also compare and choose the interest rate to avail of a loan.  

Also Read: How to get a business loan from the government in India

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