What is a Credit Score or Credit Rating?

Credit Rating Agency

A Credit Rating is a number computed by an approved credit rating agency and it provides a hint of the credit worthiness of an individual. An individual's Credit Score provides a credit institution with an indication of the "probability of default" of the individual, based on their credit history. What this means in simple English is that the Score tells a lender / credit institution (typically banks or NBFCs) how likely you are to pay back a loan based on your past pattern of credit usage and loan repayment behaviour.

What is a CIBIL score?

CIBIL score is a tool for lenders to check the borrower’s credit worthiness and capacity to repay loans. If you have a good credit score and history lenders will typically approve your loan and credit card applications. CIBIL score is calculated by the bureau based on the information that is provided to them by lenders. CIBIL uses algorithms to calculate your CIBIL score.

Your CIBIL score is a 3 digit number and the CIBIL score ranges from 300-900. If you have a CIBIL score more than 750, it means that you have a good CIBIL score. In this case, there will be many lenders who will be willing to lend to you.

What is credit rating?

Credit rating for individuals is nothing but your credit score or CIBIL score. In addition to a credits core, bureaus also provide a credit report which indicates your credit and payment behaviour.

If you have a low CIBIL score, it is possible to improve your credit rating or CIBIL score within a few months. If you have a low score, you can either take professional assistance or choose to do it on your own.

The following factors affect your credit score :

  • Obtain a copy of your credit score and credit report, and carefully scan it for any inconsistencies which might be bringing down your credit score. If you find a discrepancy, immediately file a dispute and get it resolved.
  • Delay in payments is another major cause for a low CIBIL score. Make full payments towards your credit card bills, on time, every time.
  • Utilizing too much of credit also leads to a low credit score, as it indicates you are "credit hungry."
  • Make sure you have a balance between secured loans (loans borrowed with a security or a fixed deposit) and unsecured loans (loans borrowed without any fixed deposit or a security).

Be sure not to apply for a loan immediately after a lender has rejected your loans. It is important to understand the underlying reasons. If you want to know your CIBIL score / rating, then you can register with CreditMantri and avail a Credit Health Check for free. Along with your Credit score, we also provide an online analysis of your Credit Report. In addition, we help you discover credit related products and services which are best suited for your unique credit profile.