Credit score is a 3 digit number that reflects the credit worthiness of an individual. Do you know what is this CIBIL Score? Where western countries had developed a credit monitoring system for themselves in the 1950s itself, CIBIL in India was first started in the year 2000 according to a credit rating agency.
Now CIBIL has come a long way and has played a big role in making India a financially literate nation.
A credit rating model makes the entire financial market more transparent, consistent and regulated, along with it spreads awareness among financial institutions so that they can manage risk in a better way, as well as reduce bad loans as much as possible.
At the same time, CIBIL has also been continuously updating its database and technology.
Now even a common citizen of the country can check his free credit score online. Whereas other small companies like Equifax, Experian and High Mark are also providing similar services in the market.
But in comparison to all these, CIBIL is the biggest organization in the whole country which was formed under RBI and it is governed by Credit Information Companies (Regulation) Act of 2005.
That’s why today I thought why not I am going to provide information about what is CIBIL score and what should be the CIBIL score. Then without delay let’s start.
Table of Contents
What is CIBIL Score?
Full form of CIBIL is Credit Information Bureau of India Limited. This CIBIL Transunion Score is a 3 digit number which represents your credit history.
This score is calculated on the basis of your credit report which contains your credit history. The range of this CIBIL score is between 300 to 900.
The higher your credit score, the better your credit history will be considered. Credit score in a way reflects your ability to repay the loan.
Credit Bureau Company of India
A total of four companies in India work as credit bureaus, and provide CIBIL scores, some of the most prominent.
- TransUnion Cibil Limited – It was established in the year 2000.
- Equifax – It was established in 2010.
- Experian (Experian) – It was established in 2006 (licensed in 2010)
- CRIF Highmark – It was established in 2010.
In this way, TransUnion CIBIL Limited is the oldest company to provide credit score in India, and this is the reason why credit score is simply known as CIBIL and CIBIL Score in common people.
How to check CIBIL score?
Do you want to check CIBIL score? According to a research, it was found that more than 79% of the loans are approved by those people whose CIBIL score is more than 750.
Now you must be wondering how to know about your CIBIL Score, for this you have to follow the steps given below: –
Step 1: To know the CIBIL score free, you have to check this CIBIL score online free website – https://www.cibil.com/freecreditscore/
Step 2: After this you have to fill the form, which requires all basic information such as name, address, contact number and PAN details.
Keep in mind that only recruit the correct PAN details otherwise you cannot go into further steps.
Step 3: Then some questions have to be answered about your loans and credit cards and then on the same basis your CIBIL is calculated and your credit report is prepared.
Step 4: Once you have filled all the details, the website will provide you with your CIBIL score and CIBIL report.
But just checking the credit score once is not enough. You also have to monitor the ups and downs happening in your report, because credit agencies, banks and financial institutions renew these reports every month.
For which you need regular updates but CIBIL only provides a free check. To receive regular reports, you must subscribe to their paid subscription.
What should be the CIBIL score?
As we have discussed earlier, a CIBIL score usually ranges between 300 and 900. For some people, it can go below 300, while it will never go above 900. Let’s understand it
- Below 300: If your CIBIL score is below 300, no bank will provide you with a loan, no matter what loan it is. You are considered a big risk for banks and they do not consider you credible for lending.
- Between 300 and 450: Well this is not considered so dangerous than before, but this score is also not very credible. Consider this a warning and start giving your EMIs in time so that your credit score improves.
- Between 450 and 600: This is an average score which is neither very good nor very bad. In such a score, you can also give some banks loans. At the same time, if you are given a credit card, then its credit limit will be very low.
- Between 600 and 750: This score is awesome. For this, you will be ready to provide almost all bank loans and credit cards, but you may not be able to negotiate for a competitive rate.
- Between 750-900: If your credit score is in this range, then you have maintained a perfect financial track record. Banks will also be ready to give you a big amount and will also start negotiating to finalize a great deal.
You will be offered Credit cards higher credit limit, that too with great cashback and deals.
What is a good CIBIL Score?
Credit Information Bureau of India Limited or popularly known as CIBIL is the first credit bureau in India that collects the credit history of the borrower to formulate it into a credit score.
CIBIL credit score is a 3-digit number that is calculated based on the information that provides many different lenders from whom the borrower is in debt or debt
CIBIL compares credit history to the first three years, only then your credit score is calculated.
Apart from credit history, there are many different factors, such as credit utilization ratio, number of outstanding loans, loan servicing term and percentage of unsecured loans in your portfolio which impacts your credit score.
Often 600 to 750 credit score is considered a better CIBIL score. At the same time, if you grow up from him, it is even better.
What Factors Affect CIBIL Score?
Now let us know about some such factors that impact your CIBIL Score: –
- Loan Repayment Trends: Your loan repayment history directly impacts your CIBIL score. If your EMIs have defaulted on payment, it puts a negative impact on your credit score, while if provided correctly, it has a positive impact.
- Number of loan applications and rejections: This will work if you have some loans and credit cards in your hand. But if you have applied for loans simultaneously in many institutions, then it puts a negative impact on your CIBIL score. This is because whenever you apply for a loan, it is registered in the system and when it is rejected, there is a minus mark in it.
- Use of Available Credit: How you use available credit also affects your credit score. If you use the credit limit to the fullest, it causes a negative impact.
- If there are more unsecured loans in your portfolio: As the name suggests, unsecured loans are those loans where banks and NBFCs do not take any asset on the basis of collateral. Such loans are very risky for lenders. So if you have more percentage of unsecured loans in your portfolio, then it puts a negative impact on your credit score.
- If you become a guarantor/co-borrower on a loan: CIBIL not only monitors your loans but also looks at which loans you are playing the role of a guarantor or co-borrower. If a loan primary borrower defaults on payment, then it gives negative impact to your credit score.
- Loan tenure: The longer the tenure of the loans, the more comfortably you can make timely payments, which will have a positive impact on your credit score.
- Increase the credit limit: If you repeatedly request to increase your credit limit, then it will show that you are hungry for credit, so it can have a negative impact on your score, so do not repeatedly but only increase it when the bank recommends you to increase the credit limit.
How is CIBIL score calculated?
The basis of calculation of CIBIL score is your credit history. In this, the credit bureau compiles all the information about you in a report, they do this to calculate your CIBIL transunion score.
It is calculated on the basis of your account and enquiry section of your credit report. Apart from this, below I have mentioned about some other factors which are considered when calculating the credit score.
The biggest and most important thing is credit history, it is given the most importance. It is provided a weightage of about 30%.
Credit Mix and Duration
It is seen how many percentages of loans (secured loans and unsecured loans) are in your portfolio, for how long, it provides a weightage of 25% in the credit score.
This is the total amount of credit that you have not yet paid and you have to repay it, this thing provides a weightage of 25%.
Other factors such as credit utilization, recent credit behavior also provide a weightage of 20% in your credit score.
how to improve CIBIL score?
CIBIL score is a number that can also be improved if desired. But for this, you have to follow the tips mentioned below so that there will be no further delay in getting your loans approved.
- Set up reminders to repay them in time: If you forget the repayment of one of your outstanding debts, then it is going to have a very bad flow on your credit score. So you have to stay punctual and fill your EMIs on time. If your EMIs delay, you will have to pay penalties for this, due to which your credit score can go down. If you are someone who does not remember dates, then you should set a reminder to remember them.
- Check errors in your credit report: If you are thinking in your mind that you have a good credit history, but for some reason your credit score is going down for some unknown reasons. Then you must check your reports. Let’s assume that you have paid in your EMI time, while due to some administrative error, it is not showing in your credit history, then your credit score will be completely spoiled. Therefore, you must check your credit report from time to time and remove such errors. This will show an immediate rise in your score.
- Try to maintain a healthy credit mix: It has always been believed that the mix of credits is very good to maintain the credit score. Therefore, it is advisable that there should be a confluence of unsecured loans such as credit cards, personal loans and secured loans such as auto loans, home loans. Because excess credit of any one type of loan can affect the score.
- Keep all credit cards clean: If there are no dues in your credit cards, then it indicates your better financial behavior. So try to clear all your credit card dues before their due date. This may improve your credit score.
- Never become a joint account holder: Always keep yourself away from becoming a joint account holder or guarantor of loans because if the other party is unable to repay its loan, then it can affect your CIBIL score. If you have a secured card for leading banks such as ICICI Bank, AXIS Bank, SBI, etc. in the against a fixed deposit and you have repaid it before the due date, then your CIBIL score will also increase.
- Do not take multiple loans at a time: It is a good practice to take another loan only after repaying the previous loan. This has a good effect on your credit score.
- Limit your credit utilization: One very fast way to improve your credit score is to never use your credit card to the extreme limit.
- Choose a longer tenure: Whenever you take a loan, keep the repayment period longer. By doing this, your EMI will also reduce and you can also repay it on time. At the same time, you will never come in the deafaulter list and your score will also improve.
- Increase your credit limit: If ever your bank is talking about increasing your credit limit, then never say no. Because increasing the credit limit does not increase your expenses, but if you have a large credit limit and you are using it very little, then your credit score definitely improves.
It takes about 4 – 8 months to improve the Credit Score, it completely depends on the situation of an individual. You just need to be smart, patient and disciplined when you are spending money or taking a loan.
CIBIL Score FAQ
Full form of CIBIL is Credit Information Bureau of India Limited.