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Credit Cibil Score

When you need a loan or credit card, the credit CIBIL score is an important deciding factor. Whether it is consumer CIBIL or commercial CIBIL, maintaining a high score is the best way to ensure that you are creditworthy. Here is everything that you need to know about the CIBIL score and why it is important for you.

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About Credit Cibil Score

Whether you are an individual or an organisation, there is always a time when you need financial assistance to take care of expenses. Most of us rely on loans and credit cards to manage these emergencies. In order to get these credit facilities, you need to have a good credit CIBIL score.

It is a risk assessment method that is used by lenders to understand if a borrower is low risk or high-risk candidate for credit. 

What is a Credit Score?

Every time you borrow any credit, the credit rating agencies of India maintain a record of the nature of the loan, the repayments made and your overall credit behaviour. Based on this, you are given a score or rating. This value is known as the credit score. In India, there are several credit rating agencies such as TransUnion CIBIL, Equifax and CRISIL, which calculate your credit score. The CIBIL credit score is the foremost and most popular one.

These credit agencies obtain information about individual borrowers and companies from lenders at regular intervals. Using this information, they give you a score or credit rating in India. Consumers also have access to this information through the official websites of these credit rating agencies and individual credit score calculators.

Additional Reading: What is cibil grievance?

What is CIBIL?

The CIBIL credit score is the most important one in India. It is calculated by TransUnion CIBIL, the most popular credit rating agency in India. It was also the first-ever credit rating agency to become operational in India in 2004.

CIBIL stands for Credit Information Bureau India Limited. In 2000, the Siddiqui committee of the Reserve Bank of India suggested the need for the formation of a risk assessment method that would allow lenders to assess borrowers easily. The result of this was the Credit Bureau of India which became operational in 2004. It was then acquired by TransUnion, a credit rating agency in America. Following this, the name was changed to TransUnion CIBIL.

In India, banks and other lenders refer to the CIBIL report and rating to check if a borrower is reliable for lending credit. Although there are other credit rating agencies, CIBIL is the largest one with records of more than 600 million individuals and 32 million companies. 

Additional Reading: How to read cibil report?

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Who Calculates CIBIL Score?

The CIBIL score is calculated by TransUnion CIBIL or the Credit Bureau of India. Every 30-45 days, they receive information about the credit behaviour of borrowers from respective lenders. Using this information, they prepare a CIBIL report. Then a three-digit credit score, ranging between 300 and 900, is calculated. The higher the consumer CIBIL score, the better the chances of the individual getting credit facilities.

Several factors are taken into consideration for CIBIL Score calculation

  • Repayments made towards the credit
  • Usage of credit 
  • Credit exposure 
  • Nature of credit 
  • Overall credit behaviour

This information also allows the CIBIL to maintain a record of your repayments. Any defaults or missed payments are maintained in the record for seven years. Although this is usually called a CIBIL defaulters list, it is not an official list. It is only the record of any repayment issues or inconsistency that will make it harder for individuals or companies to get credit assistance.

Click to Check: Credit History

How to Check CIBIL score?

Consumers have access to free CIBIL Score online. There are two primary options that you have to check this CIBIL Score periodically:

  • The CIBIL website: You can log on to the official TransUnion CIBIL website. In order to check your CIBIL Score, you need to create an account. By providing some personal details as required by the website, your account can be set up very easily. Every year, you get one free report with your CIBIL Score and other details. If you need to access your credit report multiple times each year, you also have the option of a subscription model. Subscribe based on the number of reports that you need annually. 
  • CIBIL score calculators: Finance companies and even websites of banks and NBFCs provide a free CIBIL score calculator that you can access anytime. You can carry out a PAN Card CIBIL Score check on these online CIBIL calculators. All you have to do is provide your PAN and personal details and click on the ‘Check credit score’ option. You will receive your credit score instantly.

A regular credit score check helps you understand your eligibility for various loans and credit products. It is also advised that you learn how to read CIBIL reports. That way, if you notice any inconsistency or wrong information, you can notify the credit rating agency immediately. Resolving these disputes is the fastest way to improve your credit score and maintain a good range of credit facilities and assistance. 

Also Check: Credit Policy of Banks

Factors that Affect CIBIL Score

There are many factors that are taken into consideration to calculate your CIBIL credit score. Some of them are:

  • Repayment History: The CIBIL report includes an important parameter called DPD or Days Past Due. This shows whether you have been consistent in your repayment of loans and credits that have been availed in the past. If the DPD is high, then your CIBIL Score is affected negatively. 
  • Credit exposure: Your credit history shows how many loans you have availed in the past and for how long you have exposed yourself to credit. With higher credit exposure, you have the advantage of a better experience with handling credit. Therefore, you are a more suitable candidate for further credit. For individuals with no credit history or exposure, it is recommended that you begin with a credit card or a special credit facility for inexperienced candidates. This will allow you to build your credit score as you make regular repayments. 
  • Credit usage: How you use the credit availed will determine your credit score. If you have the habit of maxing your credit card regularly, it is considered poor credit behaviour. As a result, you will not be able to maintain a good CIBIL score range
  • Nature of debt: The type of loans that you have availed of also affect your credit score. It is a good idea to maintain a balance between secured and unsecured loans. If you have only unsecured loans, it indicates financial distress, which can prevent you from getting credit facilities in the future. 
  • Frequency of credit application: If you have applied for various loans and credit cards in a short span of time, it is an indication of distress. Therefore, it may seem like you do not have the resources that are needed to make regular repayments for your loan.

Also Check: Credit Monitoring

How to Improve CIBIL Score?

If you wish to improve your credit CIBIL score, there are some measures that you can take:

  • Make regular repayments: Repayment towards credit accounts for close to 30% of your credit score. Therefore, ensure that you pay your EMI on or before the due date to improve your credit score. In the case of credit cards, avoid revolving credit and repay the entire amount due every month instead of the minimum payable amount. 
  • Avoid excessive usage of your credit card: Try to budget your credit card usage. Do not max out your credit card regularly. Make use of credit cards conservatively to avoid the stress of payment every month. Withdrawing cash from your credit card, especially, is not recommended as it brings down your credit score drastically. 
  • Check your credit report regularly: Sometimes, the credit report may carry wrong information or inconsistencies with respect to your repayments or other details. It can even affect your credit score negatively. Checking your credit report on a regular basis allows you to take note of these issues and resolve the dispute with the credit rating agency. 
  • Apply only for credit that you are eligible for: If any loan or credit application has been rejected, it is recorded in your credit report, affecting your credit score negatively. Make sure that you check the eligibility criteria and only opt for loans or credit cards that you are most likely to get approval on. 
  • Do not apply for too many loans and credit cards: Avoid sending out too many applications in a short span of time. Only use credit cards or loan facilities when needed. 
  • Balance the type of debt: Do not opt only for unsecured loans. Have a good balance between secured and unsecured loans to maintain a good credit score. Unsecured loans should be reserved for emergencies.

Also Check: Company cibil score?

CIBIL Score Required for Personal Loan

In order to get a personal loan, you need a higher consumer CIBIL since this loan is usually unsecured. The credit score is one of the only risk assessment tools available to the bank in this case. The minimum personal loan CIBIL score is 750 for most banks and NBFCs. There are some unique cases when the loan may be extended despite a lower credit rating, such as an expected increase in income or provision of security like a fixed deposit or insurance policy.

Getting a personal loan with a higher credit rating gives you the advantage of a higher loan quantum and lower interest rate. You also become eligible for pre-approved loans, which can be disbursed within 24 hours for any emergency.

Also Check: Bajaj Finserv Cibil Score

CIBIL Score Required for Home Loan

Home loan CIBIL score is usually a minimum of 650. The required CIBIL score is lower because home loans are secured loans. The property that is availed with the loan is mortgaged against the loan. However, for individuals with a higher consumer CIBIL, there are several benefits:

  • Lower rate of interest 
  • Higher quantum of finance 
  • The lower margin on the loan 
  • Reasonable repayment terms 
  • Discounts on the processing fees 
  • Faster approval of the loan 

Also Check: SBI Cibil Score

CIBIL Score Required for Credit Card

For credit cards, the CIBIL score required is between 650 and 700 in most banks and NBFCs. There are other factors like the nature of employment and income which play a significant role in the approval of your credit card application. Candidates with a higher CIBIL score have the following advantages: 

  • Higher credit card limit 
  • Lower rate of interest 
  • Higher revolving credit 
  • Rewards and bonus points on transactions 
  • Pre-approved credit cards

CIBIL score is a great parameter for individuals and companies to maintain financial discipline. As you aim for a higher credit score, you will notice that your repayments are more regular and that your credit behaviour improves significantly over time.

Also Check: Cibil score for credit card 

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Credit Cibil Score FAQs

✅What does high and low credit score determine?

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High and low credit scores determine the creditworthiness of the individual. A higher credit score range means that the individual is a low-risk candidate for any credit facility. 

✅How to check CIBIL score without paying a fee?

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You can check your CIBIL Score on the official TransUnion CIBIL website and use various online CIBIL score calculators for free. All you have to do is provide some details and your PAN card to get your free credit score. 

✅Why is CIBIL score important for customers?

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CIBIL score is important for customers in order to get credit facilities. If you do not have any credit history or have a low credit score, your applications for loans and credit cards are most likely to be rejected. 

✅How is the CIBIL Score calculated?

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CIBIL score, a three-digit value between 300-900, is calculated using the following information: 
Repayment history 
Credit exposure 
Types of credit 
Credit history and behaviour 

✅Is it possible for the CIBIL Score to change?

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Yes. CIBIL score can improve or deteriorate based on your credit history. Every 45-60 days, new information is shared with CIBIL by all the lending institutions. Based on this information, the CIBIL score changes to a higher or lower value. 

✅Benefits of maintaining a High Credit Score

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There are several benefits of maintaining a high credit score: 
Faster approval on credit cards and loans 
Lower rates of interest 
Better loan terms 
Higher credit card limit 
Higher quantum of finance 
Pre-approved credit facilities. 

✅Why is my CIBIL Score is not getting generated?

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If your CIBIL Score is not being generated, it means that you do not have a line of credit yet. It means that you have not availed of any credit facilities yet.