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All about CIBIL Score Or Information about CIBIL Score

There are many banks and financial institutions available across the country from where people can avail different kinds of loans such as home loan, personal loan, education loan, vehicle loan, etc. These institutions also offer varied credit cards suited to various needs of different classes of people.

Whenever you want to avail a loan, the lender checks information about CIBIL score along with other things such as your income, your employer's details, your mortgages, etc. before approving your loan. CIBIL Score determines your credibility to repay the loan without defaulting it. CIBIL Score is very significant for loan approval as it is readily available and is an important deciding factor for the lenders for whether to extend a loan or not.

What about CIBIL Score? CIBIL Score is very important in determining your eligibility to avail loan, especially Home Loans which are long term loans ranging from 20 years to 30 years.

What is a Good CIBIL score?

CIBIL Score is a 3-digit number which shows a person's creditworthiness. A CIBIL score is nothing but a credit score generated by credit bureau CIBIL. It is a summary of your credit history. CIBIL Score is calculated on the basis of different types of loans availed by you from various lending institutions which can be found in the CIBIL Report.

There are four credit bureaus which provide credit scores of the individuals. One of these credit bureaus is Credit Information Bureau India Limited (CIBIL) which has currently been renamed as TransUnion CIBIL and the credit score calculated by it is known as 'CIBIL Score'. CIBIL Score ranges between 300 and 900. 300 is the lowest score and 900 is the highest score. Higher your CIBIL Score, better are the chances of your getting the loan approved.

Importance of CIBIL Score

CIBIL Score is a very important factor which is very significant while applying for any type of credit. Listed below are the points showing its importance.

  • Quick Loan Approval: A high CIBIL score increases your chances of getting loans approved quickly. Banks and financial institutions depends heavily on CIBIL score to assess the risk of lending to you.
  • Interest Rates: A good score usually makes you eligible to get lower interest rates on loans. This saves a significant amount of money over the repayment period.
  • Credit Card Approvals: With a strong CIBIL score, you can qualify for premium credit cards which offer higher credit limits and more benefits.
  • Negotiating Power: A strong CIBIL score gives you better negotiating power while taking loan terms and interest rates.
  • Rent Agreements and Employment: Landlords and some employers may check your CIBIL score as part of their screening process to check your financial responsibility.

CIBIL Score of 700 and above is considered as good. If your CIBIL Score is 700 and above then you can get the loan very easily, at lower interest rate and at favourable terms & conditions. As per CIBIL, more than 79% of approved loans are for those individuals with a score of 700 and above.

Various determinants of CIBIL Score are Credit Utilization, Credit History, Payment History, Types of Loan Accounts, Credit Mix, etc. These factors posses different weightages while calculating CIBIL Score.

Features of CIBIL Score

Outlined below are the main features of CIBIL Score

  • Your CIBIL score reflects your entire credit history regarding all loans and credit cards you have ever taken and your repayment track record.
  • Your CIBIL score considers how much of your available credit you are using. A lower credit utilization ratio positively impacts your score.
  • It shows your repayment behavior as timely payments of your EMIs and credit card bills contribute positively to your score. In the same way, missed or late payments can lower it.
  • A good credit mix between secured loans (like home or vehicle loans) and unsecured loans (like personal loans and credit cards) can improve your score.
  • Multiple loan enquiries in a short span can negatively impact your score as it indicates a higher credit risk.

It is to be noted that even if a good CIBIL Score is an essential requirement by the lenders, it does not guarantee loan approval.

 

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