In the finance domain, CIBIL score is the aspect that determines the credibility of an individual to borrow funds from financial institutions. For almost two decades CIBIL score is the first and important prerequisite for any credit application.
CIBIL is an acronym for Credit Information Bureau of India Limited. And a three-digit number derived through an algorithm run on the individual credit history data is referred to as Score.
CIBIL has been in operations since 2001. However, RBI granted licenses to 3 more credit information companies named Highmark, Experian, and Equifax.
CIBIL has technically collaborated with two international credit controlling bodies one being TransUnion International, a Global Credit Bureau and, Dun and Bradstreet, a global provider of credit information.
The range of CIBIL score is between 300 and 900. Scores closer to 900 are considered as a high score and vice versa. Procuring a loan becomes easier with a higher credit score compared to a lower one.
CIBIL Score Range | Interpretation |
– 1 350 – 579 580 – 669 670 – 739 740 – 779 Above 800 | No credit history (NTC – New to credit) Poor Fair Good Very Good Excellent |
Your CIBIL score is mainly dependent on the number of loans you have, timely repayments, outstanding amount, and number of credit scoring inquiries. Basically, a complete credit score history.
Payment History | 30% |
Credit Exposure | 25% |
Credit Type and Duration | 25% |
Other Factors | 20% |
This is a mandatory document at the time of loan application. This includes a complete history of credit score and relevant inputs from banks and other financial institutions to enable the loan providers to make a sound judgment.
The report comprises of the following;
You can check your credit score by following the steps below:
When a credit report is pulled to check your credit score, an inquiry is conducted. A credit inquiry could be done in two ways:
Hard inquiries do not always, impact your credit scores. One of the most common misconceptions about CIBIL inquiries is that they always have a negative effect on your credit score. Even if a hard credit inquiry negatively impacts your credit score, it is only likely to drop up to 10 points and should recover within the year.
Your CIBIL score is derived through your detailed financial behavioral analysis. Nevertheless, we will discuss the main factors that impact your CIBIL score.
Below mentioned are a few activities/habits to maintain or increase your CIBIL Score.
Benefits of high credit score
A high credit score has several benefits. Below are the advantages of having a good credit score:
When you have a good credit score, you own great confidence. You can negotiate with the banks/financial institutions and grab a low-interest deal. It is always in the best interest of the bank to promote loans to an individual with a high credit score
To become a credit high scorer, it is always advisable to have a high degree of financial discipline. Apply for a loan only if it is absolutely required. And finally, keep an eye on your credit score regularly and make a conscious effort to maintain or improve it.
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