How do business loans affect your CIBIL score? How can I raise my CIBIL score fast?

CIBIL score

Loans are one of the most popular financial products offered by banks and NBFCs, but as much as it looks lucrative, there is a warning sign that you must be aware of before applying for a loan.

Loan application and approval majorly depend on the paperwork and CIBIL score. These scores are a numerical expression that highlights the creditworthiness of an individual.

The CIBIL score range is between 300 and 900, and if the CIBIL score falls on the lower side, then it adversely impacts your score and reduces the chances of loan approval.

Hence, it is mandatory to keep a close check on the credit report. Here we will be sharing tips to increase CIBIL score. Let’s get started.

Can business loans affect CIBIL score?

Similar o a personal loan or loan taken by an individual, the loan taken by a business also impacts its credit rating. Just like an individual’s creditworthiness is decided by their credit score, a company’s creditworthiness is assessed from the Company Credit Report (CCR).

Although the rule states that personal and professional entities have to be considered distinctly, many lenders still check the personal credit profile of the business owner. Hence, it becomes important that one must have a good credit score. 

If you are a business person and have taken a loan, timely repayment of the loan is paramount. Delayed repayment of a loan or being in the defaulter’s list of the bank can adversely impact the credit rating.

So you have to be cautious when it comes to applying for loans, and if you have already applied for a loan, you must ensure timely repayment of the loan.

Failure to do so will impact the credit rating. The following section highlights the ways businesses loan can impact the credit score:

Proprietorship: If you own a proprietorship business, the personal credit score is taken as the business credit score.

In this form of company, there is hardly any difference between the personal credit score. Moreover, the law also states that the sole proprietorship will be liable for any debt in the business. Hence, if, as a business owner, you turn out to be a defaulter, it will negatively show on your credit score. 

Partnership: Similar to the proprietorship, the personal credit score is also given importance in the case of a partnership. In the case of LLP, the parents are liable to a certain extent of the debt. 

Limited company: The limited companies have their own identity, and hence the members or the shareholders are not liable for any kind of debt that the business incurs. But that doesn’t mean that the personal credit score for a business loan is not assessed. 

From this discussion, we can conclude that irrespective of the business size, one must ensure that the credit score will play an important role in impacting your credit rating. 

How can I raise my CIBIL score fast?

The next important question that most people ask is how can one increase the CIBIL score?  The following tips will help you in improving the credit score:

Don’t default on payment: It is highly recommended that you should never be a defaulter. When it comes to loan repayment, you must always ensure staying away from delayed payment. Defaulting on repaying the EMIs or missing on the deadlines can impact the credit ratings.

Don’t go for a higher amount loan – As a wise business person, you must thoroughly research the loan providers and the interest rate. Once you have compared the interest rate along with the EMIs, and have the best name, only then proceed. 

Avoid taking too many loans – Capital Health India is one of the most recognized platforms offering CIBIL score improvement services, and they have figured out a common mistake that most people make that eventually badly reflects on their CIBIL score. One has to avoid taking too many loans at the same time.

Business customers- The banks may also consider the credit period given by the business owners to their customers. If the repayment from the customer is for a longer period of time, then it can lead to a lowered credit score.  

Wrapping it up !!!

CIBIL score plays a pivotal role in loan approval, and if you are running a business, it is important to consider the different aspects to ensure that nothing impacts your creditworthiness.

The above tips will help you in improving your credit score. In addition, as a business owner, you must always rely on professional services like Credit Help India.

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You can use the services of CIBIL score Credit Help India to get a detailed overview of the credit score and the factors that will help in improving the same. Stay updated with our latest business loan, personal loan, credit card articles at SugerMint.