CIBIL is a Score that portrays the creditworthiness of a person. Almost all the banks and NBFC’s rely on this powerful three digit number so as to manage the risk of not repaying the loan amount better. Therefore, it is important to maintain a good credit score in order to avail a loan from the lending institutions. Furthermore, the credit score lies in between 300-900.
The range of CIBIL Score considered healthy and otherwise is stated below:
- Excellent Credit Score – Above 750
- Good Credit Score – Between 650-750
- Poor Credit Score - Below 550
What Actually CIBIL Score Means?
A Credit Score is actually a number which portrays the overall credit flow of a person, or basically, it measures the total financial movement of a person. Moreover, The Credit Report is maintained of every person who is having a Pan Card and every transaction is tracked through that report. Furthermore, CIBIL which stands for Credit Information Bureau (India) Limited,was the first Indian company to manage the financial records of the individuals. Also, Credit Card history is also detailed in the Credit Information Report which further affects the Credit Score of any person.
How Credit Score Or CIBIL Is Calculated?
Basic factors on the basis of which CIBIL is calculated :
- 35% Payment History
- 30% Amount Owed
- 15% Length of History
- 10% New Credit
- 10% Types of Credit used.
Payment history: It is the most important factor which shows whether you give your payments on time or not.
What Should Be The CIBIL Score?
Usually,750 is considered a healthy CIBIL Score for the eligibility of unsecured services.
Though, it ranges from 300 to 900. But, any individual having a CIBIL Score lower than 550 is considered to have a Poor Repayment history hence, is not approved an unsecured loan.
Some people also have a ‘ Zero Credit History’ or ‘Negative Credit History. In such a case, the individual who has never availed a loan or credit card has a Credit Score either 0 or -1. However, this does not mean that the person has a bad repayment history. This just portrays that there is no insight on the repayment behavior of a person. Hence, in order to avail a loan, one has to Improve or Build Credit Score.
Impact of Frequent Inquiry of Credit Score
To begin, every time a lending institution checks the CIBIL Score of an individual, it is known as a Hard Query. Therefore, multiple hard queries are counted as a negative factor in the Credit Information Report. So, it is advised to not check the Credit Score frequently, as everytime a person checks their CIBIL score, it is decremented by 2. Overall, frequent checking should be avoided so as to improve your Credit score.
Factors to Improve CIBIL Score:
- Firstly, If any lending authority has rejected you to provide a loan. Then, avoid to apply in any other lending institution immediately. Because this is considered a negative factor in the Credit Information Report.
- Secondly, on applying for a Loan, the banks check the CIBIL Score. So, checking the Credit score too many times decreases this number. Therefore, one should avoid applying for too many loans.
- Next, do not settle the debts with the banks on a lower amount. Because the settlement is recorded as a negative factor in the Credit Information Report.
- Moreover, the best way to improve your Credit Score is by prioritizing the payment of the EMI’s. Avoid any delay in the payment of the Debts.
- In addition, taking distinct loans can help to increase the CIBIL Score. As applying only for unsecured services could display Credit hungry behavior of an individual.
- Another way, avoid becoming a co-applicant of any other person’s loan. Sometimes, you can be affected by the bad repayment history of the others