Do you know what is CIBIL Score or Credit Score Is? While western countries developed a credit monitoring system for themselves in the 1950s, CIBIL was first introduced in India in 2000 country according to a credit rating agency.
Now CIBIL has come a long way and has played a significant role in making India a financially literate nation.
A credit rating model makes the entire financial market more transparent, consistent and regulated and spreads awareness among financial institutions to better manage risk and reduce bad loans as much as possible.
At the same time, CIBIL has also been continuously updating its database and technology.
Now even an ordinary citizen of the country can get his free credit score can check online. At the same time, other small companies such as Equifax, Experian and High Mark also provide similar services in the market.
But in comparison to all these, CIBIL is the largest organisation in the country, under RBI. It is governed by the Credit Information Companies (Regulation) Act of 2005.
So today, I thought that why would you also provide information about the CIBIL score and how much the CIBIL score should be. Then let’s start without delay.
What is CIBIL Score?
The complete form of CIBIL is Credit Information Bureau of India Limited. This CIBIL Transunion Score is a three-digit number that represents your credit history.
This score is calculated based on your credit report, which has your credit history. This CIBIL score ranges from 300 to 900.
The higher your credit score, the better your credit history will be considered. A credit score refers to the ability to repay your loan in one way.
Credit Bureau Company of India
A total of four companies in India operate as credit bureaus and provide CIBIL scores, some of which are the most prominent
1. TransUnion Cibil Limited – Established 2000
2. Equifax – Founded in 2010
3. Experian – Established in 2006 (Licensed in 2010)
4. CRIF Highmark – Established 2010
In this way, Transunion CIBIL Limited is the oldest company to give credit score in India. In general, people credit score is known as CIBIL score directly.
How to check the CIBIL score?
Do you want to check the CIBIL score? According to research, it was found that more than 79% of loans are approved by people whose CIBIL score is more than 750.
Now you must be thinking about how to know about your CIBIL Score; for this, you will have to follow the steps given below: –
Step 1: To know CIBIL score free, you should check this CIBIL score online must-visit website – https://www.cibil.com/freecreditscore/.
Step 2: After this, you have to fill the form, which requires all the essential information such as name, address, contact number and PAN details.
Take care that right Only recruit PAN details. Otherwise, you cannot go to the next steps.
Step 3: Then some questions have to be answered regarding 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 in all the details, the website will provide you with your CIBIL and CIBIL reports.
But just checking credit score once is not enough. You also have to monitor the ups and downs happening in your report, as credit agencies, banks, and financial institutions renew these reports every month.
For which you need regular updates, but CIBIL provides only one free check. To get regular reports, you have to 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, whereas it will never go above 900. Let’s understand it
Below 300: If your CIBIL score is below 300, then you will not provide any bank loan, no matter what the loan is. You are considered a significant risk for banks, and they do not think you credible for lending.
Between 300 and 450: By the way, this is not considered so dangerous compared to earlier, but this score is also not more credible. Think of it as a warning and start giving it to your EMIs in time so that your credit score will improve.
Between 450 and 600: This is an average score that is not too good nor too bad. In such a score, you can also give some banks loans. Whereas if you are given a credit card, then its credit limit will be significantly less.
Between 600 and 750: This score is perfect. For this, almost all banks will also be ready to provide 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, you have maintained a perfect financial track record. Banks will also be ready to pay you a significant amount and begin negotiating to finalise a great deal.
You will be offered credit cards with a higher credit limit, too, with good cashback and deals.
What is a good CIBIL Score?
Credit Information Bureau of India Limited, or CIBIL, is the first credit bureau in India that collects the borrower’s credit history to formulate it into a credit score.
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A CIBIL credit score is a 3-digit number calculated based on the information that many different lenders provide, from which they have taken a borrower loan or debt.
CIBIL compares the first three years; by going somewhere else, your credit score is calculated.
Apart from credit history, there are many different factors, such as credit utilisation ratio, number of outstanding loans, loan servicing term and percentage of unsecured loans in your portfolio, which affects your credit score.
Often a 600 to 750 credit score is considered a better CIBIL Score. On the other hand, if it grows up, then it is even better.
What Factors Affect CIBIL Score?
Now let us know about some such factors that affect your CIBIL Score: –
Loan Repayment Trends: Your loan repayment history directly affects your CIBIL score. If you have defaulted in paying your EMIs, it hurts your credit score, while it has a positive impact if provided correctly.
Number and Rejections of Loan Applications: This will work if you have some loans and credit cards in your hand. But if you have applied simultaneously to many institutions for loans, it negatively impacts your CIBIL score.
This is because whenever you apply for a loan, it gets registered in the system, and when it is rejected, it gets a minus mark.
Use of Available Credit: How you use available credit also affects your credit score. If you make full use of the credit limit, then it makes a negative impact.
If there are more Unsecured Loans in your Portfolio: As the name suggests, unsecured loans are called loans where banks and NBFCs do not take any asset collateral.
Such loans are hazardous for lenders. So if you have a high percentage of unsecured loans in your portfolio, it negatively impacts your credit score.
If you become a Guarantor / Co-borrower on loan, CIBIL monitors your loans and sees which loans you are playing as a guarantor or co-borrower.
If the primary borrower default in a loan is in paying, this negative effect is reflected in your credit score.
Loan period: The longer the loan period, the more comfortable you can make timely payments, which will positively impact your credit score.
Increase the credit limit: If you repeatedly request to increase your credit limit, then it will be known that you are hungry for credit so that it can hurt your score, so not often, but when the bank asks you for a credit limit, Increase it only then increase it.
How is CIBIL Score Calculated?
The calculation basis of the CIBIL Score is your credit history. In this, the credit bureau collates all the information about you in a report; they do this to calculate your CIBIL Transunion score.
It is calculated based on the account and Inquiry section of your credit report. Apart from this, below, I have considered some other considered factors while calculating a credit score.
1. Credit History
The biggest and most important thing is credit history; it is given the most importance. It is provided with a weightage of around 30%.
2. Credit Mix and Duration
It is seen that how much percentage of loans (secured loan and unsecured loan) is present in your portfolio, even for how many periods, it provides a weightage of 25% in credit score.
3. Credit Exposure
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%.
4. Other Factors
Other factors such as credit utilisation, recent credit behaviour also provide a weightage of 20% in your credit score.
How to improve CIBIL score
The CIBIL Score is a number that can be improved if desired. But for this, you have to follow the tips given below to no further delay in approving your loans.
1. Set Reminders to repay them in time: If you forget to repay any outstanding debt ( loan amount), it will give a terrible flow to your credit score.
So you have to be punctual and fill your EMIs on time.
If you delay giving your EMIs, you will have to pay penalties for this, due to which your credit score can go down. If you are a person who does not remember the dates, then you should set the remainder to remember them.
2. Make sure to check the errors in your credit report: If you are thinking in your mind that you have a good credit history, but for some unknown reasons, your credit score is going down. Then you must check your reports.
Let’s assume that you have paid in your EMI time due to some administrative error; it is not showing in your credit history, then your credit score will be completely spoiled.
Therefore, you should check your credit report from time to time and remove such errors. This will give immediate rise to your score.
3. Try to maintain a healthy credit mix: It is always believed that a combination of credits is perfect for keeping a credit score. Therefore, it is advisable to a confluence of unsecured loans such as credit cards, personal loans, and secured loans such as auto loans and home loans because excess of one type of loan can affect the credit score.
4. Keep all credit cards clean: If there are no dues in your credit cards, this indicates better financial behaviour.
So try to clear all your credit card dues before their due date. This can show improvement in your credit score.
5. 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 their loan, it can impact your CIBIL score.
6. Take a secured card for yourself: If you have a secured card leading banks such as ICICI Bank, AXIS Bank, SBI, etc., against a fixed deposit and you have to repay it before the due date, then your CIBIL score will also increase.
7. Do not take multiple loans simultaneously: It is an excellent practice to take another loan only after repaying the first loan. This has a good effect on your credit score.
8. Limit your credit utilisation: A speedy way to improve your credit score; in this, you never have to use your credit card to the extreme limit.
For example, if you have a credit limit of Rs.1,00,000, then take care that you do not spend more than 30% of your credit limit per month, not more than Rs.30,000.
By doing this, you will see a lot of increase in your credit score.
9. Choose a longer-term: Whenever you take a loan, keep the repayment period long. Your EMI will also be reduced by doing this, and you can also miss it on time. At the same time, you will never come on the defaulter list, and your score will also improve.
10. Increase your credit limit: If your bank is talking about increasing your credit limit, then never speak. Because improving the credit limit does not increase your spending, but if you have a large credit limit and use it very rarely, it makes your credit score better.
It takes about 4 – 8 months to improve a credit score; it entirely depends on an individual’s situation. You need to be intelligent, patient and disciplined when spending money or taking a loan.
About CIBIL Score
I hope that I have given you complete information about the CIBIL score, and I hope you understand how much the CIBIL score should be.
If you have any doubts about this article CIBIL Score or you want that there should be some improvement, you can write low comments.
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