WHAT IS CIBIL SCORE OR CREDIT SCORE ?
CIBIL stands for Credit Information Bureau (India) Limited. Currently, it is known as TransUnion CIBIL Limited.
CIBIL Score is a three-digit numeric summary of your credit history. The score is derived using the credit history found in the CIBIL Report (also known as CIR i.e Credit Information Report). A CIR is an individual’s credit payment history across loan types and credit institutions over a period of time.
Note : A CIBIL REPORT does not contain details of your savings, investments or fixed deposits.
WHAT IS CONSIDERED AS A GOOD CIBIL SCORE ?
Your CIBIL score, calculated based on your credit behavior as reflected in the ‘Accounts’ and ‘Enquiries’ section of your CIR, ranges between 300-900. The closer your score is to 900, the higher are the chances of your loan application getting approved. A score above 700 is generally considered good.
WHY IS CIBIL SCORE IMPORTANT ?
CIBIL Score is required when it comes to loan and credit card applications. Having a high CIBIL score (closer to 900) implies that you have good financial history and lenders express high confidence in extending credit to such individuals. Your borrowing limit and interest can all depend on your CIBIL Score.
HOW IS CIBIL SCORE PREPARED OR WHAT IS THE BASIS OF CIBIL SCORE ?
Credit Information Bureau of India Limited (CIBIL), which is India’s first Credit Information Company, collects and maintains the records of an individual’s and non-individual’s (commercial entities) credit related transactions such as loans and credit cards. These records are provided by banks and other lenders on a monthly basis to the Credit Bureau. Using this information, a Credit Information Report (CIR) and CIBIL Score is developed.
HOW CAN I IMPROVE MY CIBIL SCORE ?
CIBIL score depends on various factors. You need to follow these steps to maintain and improve your CIBIL score :
(i) Always pay your dues (Loan Installments or Interest) on time.
(ii) Try to keep LOW credit balance.
(iii) Apply for new credit in moderation
(iv) Maintain a healthy credit mix of secured (Eg. Home Loan, Auto Loan) and unsecured loans (Eg. Personal Loan, Credit Card).
IS MY CREDIT SCORE AFFECTED WHEN I CHECK IT ?
When you check your own credit score or credit report, it is counted as a “soft enquiry”. Your CIBIL score remains unaffected no matter how many times you check your credit score for yourself. However, if banks or financial institutions check your credit report at the time of new credit card or loan application, it is considered as a “hard enquiry” and impacts your score.
Multiple hard inquiries, if done over a relatively short period of time, demonstrate what is called “credit hungry behaviour” and may hurt your credit score. But a soft inquiry, at least once a year, is considered an important financial habit.