CIBIL stands for Credit Information Bureau (India) Limited, a credit information company in India that assesses your creditworthiness by collecting, compiling, and maintaining credit. It provides a 3-digit score, known as the CIBIL score.
What is CIBIL Score and Report
A CIBIL score is a 3-digit numeric representation of an individual’s credit history. It is calculated by Credit Information Bureau India Limited (CIBIL) based on the credit information submitted by the banks and financial institutions. A CIBIL report contains details such as the date of account opening, type of loan taken, tenure, repayment track record, and the amount outstanding. The score ranges from 300 to 900; higher scores indicate healthy credit behaviour, while lower scores reflect poor management of debt obligations. Hence, you should know how to improve your CIBIL score to take advantage of its benefits.
Why is CIBIL Score Important
The CIBIL score is one of the most widely used scores to evaluate your creditworthiness. It measures your past credit performance by taking into account factors such as repayment history on existing loans or credit cards, length of current and past relationships with creditors, and the total amount owed against available limits. A good CIBIL score indicates that you are financially responsible and have been punctual in payments throughout your tenure with lenders. Banks use this information to decide whether or not you will be approved for new loans or extensions on existing ones.
What are the Advantages of a High CIBIL Score
Having a good CIBIL score is one of the essential factors in getting approved for loans or credit cards. It is also an indicator of financial health and can open up opportunities such as a mortgage, car loan, or personal loan. Moreover, a high CIBIL score provides several advantages to borrowers. Here are some of the said benefits:
- Quick Approval
An excellent CIBIL score can be a deciding factor for loan approval or rejection. A higher score indicates that you are more likely to pay back borrowed money on time, and financial institutions will be more likely to approve your application quicker than someone with bad credit history.
- Higher Loan Limits
A high score is beneficial as it can help individuals unlock higher loan amounts at preferential rates. Scores range from 300-900, and anything above 750 is considered a good score by lenders. Individuals with this score have higher chances of getting approval for upper-limit loans at lower interest rates than those with lower scores.
- Lower Interest Rates on Loans
The biggest benefit of having a high CIBIL score is that you get the advantage of grabbing low-interest rates on your loans, credit cards, and other credit products. People with a low credit score might get a loan based on other factors, but they usually have to get one at a higher interest rate.
- Amazing Offers on Credit Cards
If you have a high CIBIL score, it is evident that you must be repaying loans and credit card bills on time. This qualifies you for amazing deals, offers, and even shopping points on your credit cards.
What is the Ideal CIBIL Score
This three-digit number ranging between 300 – 900, determines your creditworthiness and is based on your loan repayment history, financial transactions, and other relevant data. It is important to maintain a high CIBIL score as it will enable you to get the benefits mentioned above.
The ideal CIBIL score one should aim for depends largely on the type of loan being applied for. Generally speaking, any individual with a score of 700 or above can be considered as having good creditworthiness, and this would enable them to have access to some great deals from banks and other financial institutions.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at firstname.lastname@example.org.