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Life is full of surprises and uncertainties. At some point, you may require a loan or an additional credit card for supporting your financial needs, be it for personal or business purposes. The main criteria considered by banks and financial institutions while granting credit is a good credit score.

CIBIL™ is a leading credit bureau in India which is authorized to generate credit report and credit score CIBIL™ score for assessing the borrower’s creditworthiness and risk appetite. So, a good CIBIL™ score ensures that you get your loan or credit card approved easily by lenders without any hassles.

Additional Reading: What is the best CIBIL™ Score

What is a good CIBIL™ Score?

CIBIL™ score is integral to the lending framework in India. It is a three-digit numeric value depicted in the credit report having a range between 300-900 and is calculated based on your existing and past overall debt repayment history.

A CIBIL™ score of 750 and above is considered a good score indicating sound financial prudence and behaviour on the part of the borrower. CIBIL™ score between 550 – 700 is considered as average score signifying a certain risk element with respect to the creditworthiness of the borrower. A CIBIL™ score between 300 – 549 indicates poor financial discipline and a high-risk category which could imply loans/credit card application getting rejected by the lenders.

When you have a high credit score, lenders are assured of your sound credit health and your capability to repay potential debts in a timely manner. The higher the credit score, the better are your chances of getting a loan/credit card approved.

What are the benefits of a good CIBIL™ Score?

A good CIBIL™ score has various benefits for a borrower. 

Greater chance of loan approval 

CIBIL™ score is one of the key criteria considered by lenders while approving or granting loans/credit cards. As such, the higher the CIBIL™ score, the better are your chances of getting your loan/credit card approved without any hassles.

A good CIBIL™  score ensures the lender of your healthy credit history and capability to repay future loans in a timely manner. A good CIBIL™ score also ensures that you are not debt hopping or piled up huge debt making it difficult to process their timely repayments

Low rate of interest

Another major benefit of a good CIBIL™ score is your chances of getting a loan at a lower rate of interest is very high. A good CIBIL™ score entails your sound creditworthiness and minimal likelihood of potential loan defaults. Lenders are thus more confident in such a scenario and reward your financial prudence with a better rate of interest terms on the loan approved.

Higher debt amount sanctioned

A good CIBIL™ score also increases your chance of getting a higher loan amount or credit card limit sanctioned. As the higher CIBIL™ score reflects your sound creditworthiness and low-risk appetite for loan default, lenders are confident in your potential capability as a prudent borrower.

Longer loan tenure

A high CIBIL™ score could also lead to better loan terms in respect of longer tenure for repayment of your loans. This would also mean a reduction in your monthly EMIs thus giving you more money at your disposal.

How is the CIBIL™ Score calculated?

CIBIL™ calculates your CIBIL™ score based on your current and past credit information like past loan repayment timelines, current outstanding loan, defaults etc. Weightage is applied to each of these factors resulting in the final CIBIL™ score. Credit report and CIBIL™ score are continuously generated by CIBIL™ for providing borrower specific credit information.

Additional Reading: How is the CIBIL™ Score calculated?

What leads to a low CIBIL™ Score?

Reasons for low CIBIL™ score could be due to :

  • Incorrect personal particulars provided by borrower or banks leading to inaccurate updating of credit records of the borrower with CIBIL™.
  • Any loan or credit card amount is outstanding as of the last date of credit report generation.
  • Multiple loans or credit card application with various lenders.
  • Over-utilization of credit limit by 30% or more of the sanctioned credit limit.
  • Late repayment or default in paying EMIs.

How to get a good CIBIL™ Score?

You can improve your CIBIL™ score by managing sound financial discipline.

Pay all outstanding debts 

Always ensure that you do not have any debts outstanding be it loan EMIs or credit card. This would ensure that you can avoid any late payment charges leading to improvement in your CIBIL™ score.

Restrict credit utilization 

At any time, your credit utilization should not be 30% or more than the sanctioned credit card limit. Going overboard on your credit limit signifies a high debt appetite, implying you could be a high-risk category for lenders. So, be very careful while spending on your credit card.

Avoid applying for multiple debts within a short-timeframe

Going in for multiple debts also entails your high-risk appetite impacting your CIBIL™ score negatively. So, manage your debt prudently and keep gaps between multiple debts to improve your CIBIL ™ score.

Additional Reading: How Can I Check My CIBIL™ Credit Score

Check your CIBIL™ score regularly

Check your CIBIL ™ credit report and CIBIL ™ credit score regularly for any errors or omissions. Get the same rectified to increase your chances of getting a good  CIBIL™ score.

Apply for a credit score

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