Getting a business loan is quite common among start-ups, traders, retailers, and manufacturers these days. This loan can help meet various business needs like working capital, buying equipment, managing cash flow, training staff, and more. However, having a good credit score/CIBIL score is crucial before applying for one.
Credit scores typically range from 300 to 900. While a score above 700 is considered good, you should aim for a credit score above 685 to avail of business loans at competitive interest rates.
If you are facing a challenge while applying for a business loan without CIBIL Score, consider these options to improve your CIBIL Score for better loan prospects:
1. Pay off debts and credit card dues on time:
Ensure you make timely payments for any outstanding debts or credit card balances. This demonstrates responsible financial behaviour and improves your creditworthiness.
2. Check and rectify any inaccuracies in your credit report:
Regularly review your credit report to identify any errors or inaccuracies. Correcting these discrepancies can positively impact your credit score.
3. Request a credit card limit increase:
Contact your credit card issuer to request an increase in your credit limit. A higher credit limit can lower your credit utilisation ratio, which can positively affect your credit score.
4. Avoid becoming a guarantor or co-borrower:
Refrain from guaranteeing someone else's loan or becoming a co-borrower, as it can affect your credit score if they default on the loan.
5. Keep old bank accounts or credit cards open:
Maintain your old bank accounts or credit cards, even if you are not actively using them. Older accounts with a positive history can contribute positively to your credit score.
6. Diversify credit types and opt for unsecured loans:
Have a mix of different types of credit accounts, such as credit cards, instalment loans, and mortgages. This diversification shows that you can manage various types of credit responsibly. Additionally, opting for unsecured loans, which do not require collateral, can demonstrate your creditworthiness.
7. Limit unnecessary loan inquiries:
Avoid applying for multiple loans or credit cards within a short period. Each loan application generates a hard inquiry on your credit report, which can temporarily lower your credit score. Limiting unnecessary inquiries helps maintain a stable credit profile.
By following these steps, you can increase your chances of securing a business loan, by improving your low CIBIL Score. To provide further support for your enterprise's growth and development, apply for a Bajaj Finserv Business Loan today.
