What is CIBIL Score and How to Improve Your CIBIL Score?

Does the word CIBIL score ring any bell? Do you know what it is? Or why does it matter to you? Well, read on!

CIBIL score refers to 3 numerical digits which signify the credit history effectiveness of an individual. CIBIL stands for Credit Information Bureau (India) Limited who prepares a Credit Information Report (CIR) for every individual.

CIBIL score

This score is essential to evaluate and approve loan applications.

A Brief Intro

Founded in 2000, CIBIL is India’s first Credit Information Company. It is also known as the Credit Bureau and is regulated under the Credit Information Companies Regulation Act, 2005. By providing fair ratings to each individual, they play a major role in preventing loan risks.

A CIBIL report doesn’t contain any details of one’s savings or investments but consists of all the credit and loan information. The bureau collects and maintains credit records of approximately 600 million people by fetching data from the banks, NBFCs and other credit institutions.

You can check your CIBIL score by visiting the official website of CIBIL and paying a nominal fee for the same.

CIBIL score

What does this score showcase?

CIBIL score gives an idea of one’s past credit records, a person’s eligibility for a loan application. If the score ranges above 700 , then it shows that the member was consistent in paying his past dues within stipulated deadlines; as a result, home or car loans will receive approval conveniently.

Scores from 700 are impressive, and members are likely to get secured as well as unsecured loans at attractive interest rates from major banks or non-banking financial institutions.

While a score between 550 and 700 is also acceptable, members with credit scores below this range show significant irregularities in repayments leading to difficulty in getting future loans approved.

Some of the common reasons that trigger CIBIL scores to get lower are –

  • Outstanding Credit Card Balance: This happens when a borrower fails to clear the outstanding credit card bill amount and only chooses to pay the minimum amount.
  • Numerous Loans: Applying for multiple loans simultaneously can impose stringent enquiry on one’s credit history; invariably causing a negative impact on one’s CIBIL score calculation. ,
  • Delay in Repayments: If the member consistently delays repaying the EMI, that would be noted in the CIBIL report and result in lowering of the credit score.

Having a low CIBIL score is not the end of the world. But, it helps in faster and smooth processing of business loan.

However, it is preferred to have a good score as it can leverage future loans approvals. A good score places you ahead of the queue while applying for a loan or credit card, and at competitive interest rates.

Business loan

Before approving new loans or credit card requests, banks and financial institutions firstly check the CIBIL score and then go for the other enquiries.

For credit cards, a good score can ensure higher limits too. Having a good score can also help you bypassing security deposits.

Though having a good score doesn’t guarantee loan sanction as the grantors consider other important factors like income, debt and repayment abilities; it gives you ground to negotiate with the lenders as well as provides you with more options.

Sanction of pre-approved loans is one of the major perks of a good credit score. Based on your credit history a loan granter will find that for all of the previous loans you have been reliable throughout the tenor and paid all the EMIs on time. This indicates that the user will not deviate from this in future; hence loans get sanctioned immediately.

How to improve your CIBIL score

A low CIBIL score can indeed make you unappealing towards the lenders, but you can improve the same with the following 3 tips –

1. Stay updated

Know your CIBIL scores regularly to stay updated; this may help you find any discrepancies that are taking your score down. While loan frauds or administrative errors can be issues, one needs to contact CIBIL for removing such issues.

2. Clear the dues

It is of utmost importance to clear off all credit card outstanding dues within given deadline. Every lender wants a disciplined user, and this would reflect positively on your credit history.

Also, do not delay or miss payments anymore. Plan and restrict your credit usage in a way so that it doesn’t create dues again in future, do this by keeping in mind the 30% rule of credit utilisation. This will help to balance both your savings and credit.

3. Avoid multiple loans at the same time

Whenever a loan gets rejected, it goes into your credit report. If you go and apply to another bank at the same time, they will see your previous rejection and may reject it again. It is preferred to keep the frequency of application low so that your records don’t project you as a credit hungry consumer.

Hope, now you are well aware of what CIBIL score is and how it can be instrumental to assess your current and future financial needs.

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