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The Business of Credit: A Self-Employed Perspective
For self-employed professionals—be it doctors, CAs, or small factory owners—access to capital is the fuel for business expansion. In India, a personal CIBIL score of 750+ is usually the entry requirement for most 'Business Loans'. Unlike salaried employees, your credit profile is vetted alongside your Income Tax Returns (ITR). Building a score as a self-employed individual requires a slightly different tactical approach.
Leverage Business Credit Lines
Instead of relying purely on personal loans, business owners should use 'Overdraft (OD)' facilities or Cash Credit (CC) limits. Repaying these within the cycle not only helps with business cash flow but also builds a very strong 'Credit Mix' on your CIBIL report, showing that you can manage complex financial products.
The ITR and Credit Correlation
CIBIL scores and ITR filings go hand-in-hand for the self-employed. Ensure that the income you declare in your ITR is sufficient to cover the EMIs you are paying. Lenders look at the 'Fixed Obligation to Income Ratio' (FOIR). Even with a high CIBIL score, if your ITR doesn't show enough income to support a new loan, you might face rejection.
