Before offer you loan or credit card, Bank should know about your financial history and credit worthiness. CIBIL helps banks to measure the individual’s capability and probability of repaying the loan. CIBIL (Credit Information Bureau (India) Limited) is Credit Information Company (CIC) that provides credit related services to its members nationwide. CIBIL has been collecting and maintaining credit information of Indian residents provided by banks and NBFCs. The credit bureau on the basis of the credit information of an individual, generates their credit report and CIBIL Score.
On the basis of the credit report provided by CIBIL, Loan and credit card providers analyze whether the applicant is capable of repaying one’s loan on time or not. The CIBIL Score is a number that indicates an individual’s credit worthiness. It impacts the individual’s capability to borrow and take new credit from lenders. Usually, banks or lenders use this credit score to evaluate the probability of whether an individual repay his debts or not.
How Credit score is calculated?
CIBIL Score calculated based on complex algorithm which consider credit card usage, repayment of credit card payment on time, number of unsecured loans(Personal Loan), repayment history of personal loan, number of credit cards, number of personal loan, home loan and vehicle loan. Reports generated based on these factors and give you score on your transaction credibility.
Loan Repayment History (Impact: Highest)
Repayment history is the most important factor considered while calculating the CIBIL score. If you have been making timely repayments on your loans, you are seen as a responsible borrower with very low risk of defaulting. This credit behavior will make you eligible for loans at preferential interest rates and better loan terms.
Credit card Consumption (Impact: High)
How you consume credit is the second biggest factor that affects your CIBIL score. A credit utilization ratio is calculated to determine your credit consumption. This ratio is the total amount of credit you have used out of the total credit limit available to you. Simply put, the credit utilization ratio is calculated by dividing the overall outstanding balance by your total credit limit. Financial experts recommend keeping the ratio below 30%. Lower the credit utilization ratio, the better it is for your CIBIL score.
Credit Age (Impact: Medium)
A long credit duration helps lenders decide your creditworthiness. It depends on how long you have had credit and how you have been handling it. A long credit history with good repayment behavior boosts your credit score. Financial experts often recommend not to close credit cards with a long history. If you have to, close the recently acquired ones.
Credit Mix (Impact: Low)
A good balance of secured and unsecured loans boosts your credit score. An example of a secured loan is a home loan or a car loan. And an example of an unsecured loan is a credit card or a personal loan. Although the credit mix has a low impact on credit score compared to other factors, don’t ignore it. Avoid borrowing only one type of credit. Have a balanced mix of both unsecured and secured loans as you need to have experience of handling all sorts of loans.
Hard Credit Enquiries (Impact: Low)
Whenever you apply for any form of loan or credit, the potential lender pulls up your credit report to check your creditworthiness. This enquiry is registered as a hard enquiry in your credit report and has a negative impact on your CIBIL score. If you make too many loan applications, too many hard enquiries will be registered, adversely affecting your credit score.
Know your CIBIL Score:
You can get CIBIL score free by, WishFin, bankbazeer or visit CIBIL’s official website. CIBIL score ranging from 300 to 900. The credit score reflects how well or how poorly a person has dealt with loans or credit cards in the past. The higher your CIBIL score, the better your chances of getting a loan or credit card application approved when you apply for it.
CIBIL Score Range
750 – 900 (excellent)
700 – 749 (good)
650 – 699 (fair)
600 – 649 (poor)
Below 600 (red flag)
1 to 5 (New borrower, no credit history)
-1 (New borrower)
Improving CIBIL Score:
Proper usage of credit cards and repayment credit card helps you to improve the CIBIL Score.
- Never utilize more than 50 percent of your credit cards limit.
- Do not apply for multiple credit cards and personal loans.
- Never miss your Credit card bills or loan EMI. Pay them before due date.
- Keep all your “No Due Certificate” from your banker after closing the cards accounts or loan.
- Check your credit report for errors
Loan with lowest interest by High CIBIL Score :
Better Credit Score helps you get loans at much better rates from lenders/Bank. Credit score above 750 considered good and quick approval for loan and credit card. Credit score with 750 – 900 range helps borrowers to get loans easily from banks. Better score on the credit score gives leverage when negotiating interest rates. So make effort to maintain good credit score to get loan approval in future.
CIBIL rating / CIBIL Score reflects the credit worthiness of an individual.
Impact of CIBIL Score:
Your credit card and personal loan application would be rejected if CIBIL score is low. It would block your home dream by affecting approval of home loan.
CIBIL score decide whether you should be sanctioned a loan / credit card or not.
check cibil score free – How to get CIBIL Score :
To get your credit report for free by visit CIBIL official website and click on the link for free credit report. Create your CIBIL account. Fill out a form with below details Date of birth Gender Postal Address Identity Proof Number (PAN, Aadhaar, etc.). Accept terms and conditions Once you accept terms and conditions, CIBIL will show your Credit Information Report (CIR) with CIBIL Score.
Happy improving CIBIL Score 🙂