A credit score is one of the most critical elements in determining the terms of your loan agreement and, in some cases, can even be the deciding element for your loan approval. In such scenarios, your credit score becomes your most significant financial asset.
In order to purchase a two-wheeler in India, you have to maintain a credit score of 750 or above. If you have a very low credit score, it may result in the rejection of your two-wheeler loan application. However, you can take measures to improve your credit score.
Read on to learn about how to increase credit score for a two-wheeler loan.
What is a Credit Score?
A credit score or CIBIL score is a three-digit number, usually ranging from 300 to 900, that is derived by analysing a person’s financial records, especially their credit history. It represents how well a person can handle all the money they borrow.
What are the Credit Score Requirements for a Two-wheeler Loan?
The table below shows different credit scores and conditions of loan approval associated with them.
Credit Score
Loan Approval
Below 650
It is unlikely that you will get your loan approved. If it is approved, the interest rates will be very high.
Between 650-700
The lender may approve the loan based on conditions such as high income and loan amount.
Between 700-750
Very likely.
Above 750
High chances of approval with favourable loan terms.
What are the Top 6 ways to Improve your Credit Score for a Two-wheeler Loan?
There are several ways in which you can improve your credit score to get approval for your bike loan. These include:
1. Get your credit report and rectify any errors
The first step in improving your credit score is to obtain your credit report from trusted sources such as TransUnion CIBIL, Experian, or Equifax. Carefully review the report and check for any inaccuracies in it. They can be associated with personal information, account details, payment history, employment information, duplicate accounts, or incorrect overdue amounts.
If you find any inaccuracies, file a complaint with CIBIL to rectify the error. Although inaccuracies in the report are quite common, they can unnecessarily lower your credit score.
2. Pay your bills on time
An easy measure to boost your credit score is to pay your bills on time. Pending or late payments of your utility or credit card bills typically negatively affect your credit score. You can even choose the automatic bill payments option or set calendar reminders to ensure your bills are never due.
3. Clear outstanding debt
Punctual repayments of your existing debts reflect your financial discipline and a higher potential to handle new debts. To improve your credit score for a bike loan, ensure that your debts are always low and you have a history of consistent repayments.
Prospective lenders closely analyse your repayment history while considering your loan application. For disciplined repayments, you can also set reminders of your due dates or opt for automatic debits to avoid missing any payments.
4. Aim for lower Credit Utilisation Ratio (CUR)
Credit Utilisation Ratio (CUR) is the amount of money utilised from the credit limit. A higher CUR indicates that most of your expenses are made from your credit, and it reflects poor financial management. You must maintain a CUR of less than 30%, as a higher CUR can lower your credit score.
If you are facing regular credit limit breaches, you can consider contacting your credit card company to increase the limit.
5. Mix up your credit
A diverse credit portfolio can boost your credit score. It involves having a balanced mix of secured and unsecured debts with both long and short tenures. A secured debt is one that is backed by an asset as collateral, while an unsecured loan is not tied to any asset of yours. A diverse credit mix may include a couple of credit cards, personal loans, home loans or vehicle loans.
6. Limit new credit applications
Each time you apply for a new credit, you incur a hard inquiry or hard pull. A hard inquiry is a request by a lender to view your credit report when considering your loan application to evaluate your credit history. Too many hard pulls in a short span of time typically negatively impact your credit score as it could indicate that you are heavily reliant on new credit to manage your money.
The bottom line
A low credit score may prevent you from financing the bike of your dreams. However, following measures such as diversifying your credit portfolio, paying your bills and loan repayments regularly, maintaining a low CUR, and limiting new loan applications can gradually increase your credit score. Once you achieve a good range of credit score, you can easily avail low bike interest rates or even a favourable loan tenure. If you have a two-wheeler on your mind that you want to finance, check out Tata Capital’s two-wheeler loan options for attractive interest rates and a hassle-free loan application process. For more information, head to the Tata Capital website or download our app!
A credit score of 750 or above has a high possibility of loan approval. Some lenders accept a CIBIL score of 650 or less but may charge high interest rates.
How long does it take to improve my credit score?
Maintaining a good credit history, a low CUR, and timely payment of debts can improve your score. However, this may take between a few months to a few years.
Can paying off a loan early improve credit score?
When you pay off a loan early, it reduces debt and improves your credit. However, that loan account gets closed, and closed accounts won’t impact your credit score.
13 February 2025
5 mins read
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