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What is a CIBIL™ credit score?

Credit Information Bureau (India) Limited, commonly known as CIBIL™, is India’s first Credit Information Company or Credit Bureau. It maintains records of all credit-related activity of individuals and companies including all transactions on loans and credit cards. This extensive data enables lenders to make informed decisions on evaluating applications for loans in India.

The credit activity recorded could include details of every single loan or credit card repayment made (or missed or delayed); every loan or credit card application and corresponding approval or rejection; number and age of the credit accounts; total credit limit; credit balance and credit utilization ratio, among other detailed data. The records are submitted to CIBIL™ by registered member banks and other financial institutions on a periodic (usually monthly) basis. Based on this data, CIBIL™ issues a Credit Information Report or CIR (commonly referred to as a credit report) and a credit score.

A CIBIL™ credit score is a three-digit number between 300 and 900. It is based primarily on your current and past loan/credit card repayment history, among other factors. It gives potential lenders a snapshot of your credit health and your willingness and ability to repay your debts on time.

Your credit score is contained in your credit report which is a comprehensive document detailing your current and past credit activity. The better your credit history, the higher your score will be.

CIBIL™ is one of the four authorized credit bureaus in India which provide a credit score, the others being Equifax, Experian and CRIF High Mark.

In simple terms, your credit score gives banks/credit card companies a quick idea of how reliable you are in fulfilling your debt obligations. Based on your credit score, many lenders decide whether to approve your loan/credit card application.

Lenders generally look for a minimum score of 750 when reviewing your application because it signifies a low-risk customer who has demonstrated a good track record of repaying loans on time. You stand a good chance of being approved for a loan/credit card with a score of 750 or above.

Similarly, if you have a low banks are reluctant to lend to you as your score reflects faulty credit behaviour in the past. If you have a poor score, lenders will be unwilling to take a chance on potential defaults or irresponsible payment behaviour in the future and might decide to reject your application.

Lenders report every credit-related transaction to CIBIL™ on a monthly basis. This includes your

a. payment history (current and previous) on all your loans and credit cards

b. total available credit balance

c. number and age of your loan and credit card accounts

A complex mathematical formula is used to calculate your credit score based on this and other related data.

The biggest factor that makes up your credit score is your repayment history. Even one or two missed or delayed payments can negatively impact your credit score.

Your credit score is calculated taking into account all these factors and is an extensive analysis of your credit worthiness. Lenders rely on your credit score to give them an accurate idea of your credit behaviour. A good credit score reflects financial maturity and is an important factor in the evaluation of your loan or credit card application.

FAQs

1. What is the importance of the CIBIL™ score for personal lending?

The CIBIL™ score is assessed by lenders to check the creditworthiness of the borrower. The higher your CIBIL™ score, the higher the chances of getting a loan approval. People with lower CIBIL™ scores may have a hard time obtaining loans, and even if they get loans, they may end up paying higher interest or not getting the desired loan amounts.

2. Will I obtain a loan with a credit score of 600?

It is difficult to get a loan with a credit score of 600, since most banks, NBFCs, and financial institutions look for a cred it score of at least before approving a loan application. If your credit score is 600, you are likely to face loan application rejection.

3. Is the CIBIL™ score required for a loan?

Generally, borrowers are required to maintain a CIBIL™ score of 750 and above to easily qualify for a loan. But in cases of balance transfer requests or debt consolidation, lenders may reduce their CIBIL™ score requirement in lieu of the interest it charges from customers.

4. What is an Ideal CIBIL™ score to avail of a personal loan?

CIBIL™ score is a 3 digit score in the range of 300 to 900 as given by Transunion CIBIL™ - one of the 4 credit bureaus. The other 4 credit bureaus are Experian, Equifax, and CRIF Highmark. The CIBIL™ score is based on factors, such as credit history, repayment history, frequency of loan applications, current loans, usage of credit limit, and so on. To get a personal loan easily, the minimum CIBIL™ score should be 750 and above.

5. Why is it important to maintain a good CIBIL™ score for a personal loan?

  • It indicates that you are healthy credit-wise
  • Leads to quick loan approval
  • Makes you eligible for a higher loan amount and lower interest rate
  • Gives you negotiating power to get the best interest rate and loan offers by choosing from a pool of lenders
  • You can avail higher loan amount by negotiating with lenders

Disclaimer

The 4 credit bureaus- CIBIL™, Equifax, Experian, and CRIF Highmark offer credit scores in India. The points mentioned above are true for credit scores from any bureau, not just CIBIL™.

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