A Credit Score or the CIBIL Score is a three-digit numeric summary of your credit history. It ranges from the scale of 300 to 900. The score is derived from your credit history. Credit history is a record of your credit activity. This includes your bill repayments, how many credit cards you have, the type of credit you use and if you have any debts.
The closer you are to the 900 mark the better is your credit value. In fact, anything above 750 is considered a good credit score. Credit history is provided in the Credit Information Reports (CIR).
A CIR is like a marksheet that summarises the loan payment history of an individual across various loan types with various financial institutions over a period of time. However, the CIR reveals no information regarding a person’s investments, savings, fixed deposits or personal possessions.
Credit Information Bureau (India) Limited, commonly known as CIBIL, is India’s first Credit Information Company or Credit Bureau. CIBIL takes charge to collect and manage the repayment records for loans and credit cards, for both individuals as well as commercial entities. These records are collected each month from various registered member banks and financial institutions. Based on this data, CIBIL issues a CIR and a credit score. The CIBIL score, in turn, allows lenders to evaluate and potentially approve loans.
Paying back your bills and loans on time and adhering to the due dates is important for a good credit score. Your payments reflect your sense of responsibility and your responsiveness towards your obligations and promises. It makes you a more reliable borrower making your credit score rankings high.
When you have a long credit history, banks are reassured that they have detailed and substantial information on your credit behaviour. If you have paying a debt for a longer period of time and ensuring timely payment it would improve your credit score.
Loans are availed for housing, education, vehicles as well as for other requirements. It serves as a convenient and flexible financial arrangement but too many loans on your name can dampen your credit graph. A healthy mix of secured and unsecured loans is a smarter option. Unsecured loans lower your CIBIL. Whereas, credit options like home loans affect positively because home loans are used to fund assets and are thus considered financially fruitful.
Unfortunately it’s a myth that if you possess a credit card, you will end up spending too much and will get multiple debts. However, the fact is the absence of credit transactions in spite of having a credit card will make your credit history dormant. Your credit file gets inactive hence hampering your credit score.
An individual who acts as a guarantor for loans taken by friends/relatives could also suffer a disadvantage in the whole course. A failure to pay the loan by the applicant adds an obligation of repayment on the guarantor and failing to repay may adversely affect his credit status.
Keep a track of your credit score. Bring notice to any discrepancy in the data related to your credit standing. It is very important to rectify any errors, unduly over dues or non-repayments mentioned in your account. Also before you apply for any type of loan, make sure you check your CIBIL score online. in order to be assured of the approval of your loan by self-policing your eligibility status.
Now that you have an idea of how the CIBIL score system works, you may want to take a quick look at how it works. Here is how you check your CIBIL score:
As discussed, CIBIL score ranges between 0-900. Now that you have gotten your score, this is what it means:
NA/NH: “Not Available” or “No History: is usually displayed if you do not have a credit history. If you want to build credit, consider taking credit.
350-549: Considered a bad credit score. This means you are late with loan or credit repayments. You are being seen as a high risk defaulter and can face difficulties when applying for a loan.
550-649: Considered a fair CIBIL score. However, this is not the ideal range for loan approvals as it shows you are struggling to make your repayments in time. Take measures to improve your score if you need to get loan approval. The interest rates for your loans could also be quite high.
650-749: This is a good CIBIL score. Continue to exhibit good credit behaviour with repayments on time to increase your score further. The higher the score, the more negotiation power one has with lenders.
750-900: This is an ideal CIBIL score to have. Your loan approvals will be faster as you have the lowest capacity of turning into a defaulter.
Also read, How to improve your CIBIL score. Please note that your CIBIL score is updated every 45 days.
Be regular and consistent with your EMI and other bill payments. Also try to repay bills in full rather than paying the minimum amount due. Increase your credit limit if you can’t reduce your credit spending. Don’t foreclose accounts by lump sum payments. Don’t go credit hungry by applying for multiple loans.
Yes, a CIBIL score of 700 is considered a good credit score for loan approvals. It shows you have good credit behaviour and will not default your repayments.
Yes, a CIBIL score of 750 is considered a good credit score for loan approvals. It shows you have good credit behaviour and will not default your repayments.
CIBIL is the abbreviation for Credit Information Bureau (India) Limited, commonly known as CIBIL, is India’s first Credit Information Company or Credit Bureau. A Credit Score or the CIBIL Score is a three-digit numeric summary of your credit history.