Credit is a century-old financial trend that helps consumers to fulfill their dreams. Today, consumers can get loans for home, education, business, car, etc. But, to get a quick approval of a loan, they need a good CIBIL Score. Wondering what it is? Let’s understand it

What Is CIBIL Score?

The full form of CIBIL is Credit Information Bureau (India) Limited. It is the most popular and oldest credit information company, and it has RBI license. Like CIBIL, three other licensed credit bureaus are Experian, Equifax, and CRIF High Mark. Established in 2000, CIBIL is a part of TransUnion and it has credit records of 600 million individuals and 32 million businesses. CIBIL takes care of individuals' and businesses' credit files.

Based on credit history (loan taken and repayments - with/without delay), credit information reports (CIR), and ratings, CIBIL provides a 3-digit number, ranging from 300-900, and this number is called the CIBIL Score. Higher CIBIL Scores indicate a higher possibility of getting a loan and vice-versa. It shows the creditworthiness and reliability of the borrowers (based on how good they are during repayments) to the lenders.

Here credit history is the record of debt repayments of a borrower and based on it, the borrower becomes eligible for loans in the future. A credit report is the complete summary of the borrower’s credits along with sources (public/private banks, NBFCs, agencies, etc.).

Score Range And Meaning

Check the table below to understand the meaning of different CIBIL Score ranges:

CIBIL Score Range	Ratings
NA/NH	'Not Applicable'/'No History' (No loans taken)
300-549	Poor/Bad (too many late EMIs - lenders consider these borrowers risky)
550-649	Fair/Average (Suspects of few missed EMIs – some lenders can offer credit but at high interest)
650-749	Good (Good credit behaviour – lenders consider these borrowers as responsible)
750-900	Excellent (Lenders consider them as high-priority borrowers and provide loans with better interest rates)

To get quick loan approval, a CIBIL Score above 700 is very helpful.

Differences Between Credit Score And CIBIL Score

These two may sound similar, but there are differences:

CIBIL Score	Credit Score
Shows creditworthiness	Shows complete credit history and credit utilisation of the borrower
Derived from credit score	Derived from credit history, sources, repayments, etc.
Ranges from 300-900	FRanges from 300-850/900
RBI-licensed	Regulated by different authorities

What Is CIBIL Report?

A CIBIL Report is a consolidated report of a borrower that includes CIBIL Score, credit history, CIR, contact information, loan account information, and employment information. Lenders check this entire report before approving a loan application.

How Is CIBIL Score Calculated?

CIBIL Score is generated based on 5 factors:

Factors	Meaning	Weightage
Payment history	Any late payments in 18-36 months Fewer late payments – recommended	35%
Credit utilisation	Usage of credit to the total limit The lower, the better	30%
Length of credit history	Duration of the credit Long duration – recommended	15%
Credit mix	Mix of secured and unsecured loans	10%
Enquiries	Applying for numerous new credits at the same time – considered as risky	10%

These 5 factors create the CIR, and CIBIL Score is derived from that CIR.

How Does CIBIL Score Impact Borrowing?

Low CIBIL Scores delay loan approval as well as increase interest rates. Not just that, loan terms also become complex for individuals with low CIBIL scores. In case the borrower seeks a large value credit, there is a possibility of denial because of low CIBIL scores. A slight problem in any of the 5 factors mentioned above can impact the overall CIBIL Score.

Factors That Cause Low CIBIL Scores

There are a few specific reasons behind low CIBIL Scores:

1. Late credit card bill/EMI payments
2. Too high credit utilisation
3. Short credit duration
4. Any specific type of loan
5. Too many credits at one time

Factors That Do Not Impact CIBIL Scores

Apart from these, no other factor impacts CIBIL Scores. Based on the popular queries here are a few factors that will not affect the CIBIL Score:

1. Bounced cheques
2. Debit/ATM card transactions
3. Any increase/decrease in income
4. Change in demographics
5. Late payments of utility bills (electricity, water, gas, etc.)
6. Balance in savings account
7. Investment schemes
8. Repetitive checking of CIBIL Scores

How To Check CIBIL Score?

To check CIBIL Score and report, just click on https://www.cibil.com/freecibilscore and provide the details accordingly. Also, there are apps for the same purpose.

What Is A Good CIBIL Score?

750 above score is a good CIBIL Score.

Importance: Why CIBIL Score Matters?

A lender, before lending money to a borrower checks the CIBIL Scores to ensure on-time repayment. Here, the lender can be any bank as well as any agency. In case the borrower has a poor CIBIL Score, the loan application may get rejected and it may not even get further consideration. On the other hand, good/above average CIBIL Scores help in getting a loan faster in easier terms, lower interest, and longer tenures, along with easy documentation.

How To Improve CIBIL Score?

Following is the checklist to boost CIBIL Scores:

• Pay credit card bills on time
• Pay EMIs before the due date
• Maintain a healthy credit mix
• Avoid taking too much amount of loans or too many loans at a time
• Get credits within the limit you can repay
• Keep credit utilisation below 30% of the allowed limit
• Check that the co-signed or joint holder (if any) does not miss any payment
• Keep old credit accounts active because it can broaden the credit history
• Clear outstanding debts
• Review credit history throughout the year and take action on finding anything negative

End Words

Indeed, credit is sometimes essential these days – so maintaining good CIBIL scores is essential to get money when needed. You must ensure timely repayments to become a creditworthy borrower to lenders in future so that you can obtain a good score. Lenders want to ensure that the borrower is reliable enough before lending and CIBIL Scores help there. So, consistently maintain good CIBIL Scores to smoothen the path of faster and easier loan approval in the coming days.

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