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.
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.
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.
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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?
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:
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
Consumers have access to free CIBIL Score online. There are two primary options that you have to check this CIBIL Score periodically:
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.
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There are many factors that are taken into consideration to calculate your CIBIL credit score. Some of them are:
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If you wish to improve your credit CIBIL score, there are some measures that you can take:
Also Check: Company cibil score?
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
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:
Also Check: SBI Cibil Score
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:
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.
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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.
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.
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.
CIBIL score, a three-digit value between 300-900, is calculated using the following information:
Types of credit
Credit history and behaviour
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.
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.
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.