After going through this blog you shall clearly understand What is CIBIL? What is a good CIBIL score? How to improve your CIBIL score? You shall become aware of all the basics related to CIBIL and easy ways of increasing your credit score.
Let’s get started…
Have you ever wondered why its really easy for some people to get loans and other credit facilities while others struggle hard to get hold of them. There is nothing magical done by the ones who have easy availability of credit options. It’s just that they have a clean credit background and have maintained a good credit score over the years.
What is CIBIL?
Credit Information Bureau Limited or CIBIL is a credit information company that maintains the records of credit related activities i.e. activities related to credit cards and loans.
The banks and financial institutions submit data to CIBIL and in turn CIBIL issues a report known as Credit Information Report (CIR) or Credit Report as we commonly say.
CIBIL constitutes of 2 parts:
- Consumer Bureau: Dealing with consumer related credit records.
- Commercial Bureau: Dealing with credit records of companies and institutions.
So,CIBIL is a database of credit information and records of your past loans, credits, repayment history etc. from where you get a credit score evaluated that is called your CIBIL Score.
All banks and NBFCs are required to check the CIBIL score in order to establish the credit worthiness of the applicants.
What is a Good CIBIL Score or Credit Score?
CIBIL Score is a 3 digit numeric summary of your credit background based on the Credit Information report. CIBIL score generally ranges from 300 to 900. The nearer you are to 900 the better credibility you have to avail easy loans and best credit cards.
If you have a score ranging between 750-900 you are considered credit healthy. This means, you can have free access to various credit opportunities in a hassle free manner. A credit score above 750 opens your doors to quicker credit opportunities. Therefore, banks and NBFCs are comfortable to offer you high value loans and don’t hesitate in advancing any loans.
Hence, a high CIBIL Score represents you as a person with strong creditworthiness, the one who shall repay all his credit dues on timely basis. On the other hand, a low credit score turns you to a risky borrower having lower creditworthiness.
Here is a small table displaying the range and Credit health of a Loan/Credit card applicant:
|CIBIL Score or Credit Score||Credit Health of Applicant|
|750 and above||An Excellent Credit Score|
|550 and below||Bad|
In general, CIBIL Score acts as a great resource to filter various loan and credit card applications. CIBIL Score acts as a crucial factor to check your loan eligibility i.e. if you are eligible to get your loan or credit approved or not. A good CIBIL score is what the banks and credit institutions look for while sanctioning loans and other credit facilities.
Good CIBIL Score or High Credit Score: Benefits
- Quicker Loan approvals and processing: Who doesn’t like getting faster loans, that too when really need them? We all do, Right!
- Instant credit card approvals with higher credit limits: Now, that’s interesting! High credit limit is really attractive. Isn’t it!
- Easy sanctioning of higher loan amounts: Thinking to buy a house or start a business, you shall need a big loan amount.
- Low interest rates may be offered in some cases: We hunt for low interest rate loans, don’t we?
- High repayment period may be offered: An additional advantage!
- A healthy credit portfolio is anyways advantageous: You tend to maintain your overall credibility. A solid image in front of lenders, that shall help you get further credits, if necessary.
Wait! Don’t get carried away…You should apply for a loan or credit card only if you actually require it. After,all the interest meter is always running and you need to pay it back within adequate time period.
When you are in urgent need of money, a good CIBIL score comes to your rescue. This helps avail easy funds from lenders whether banks or Non Banking Financial Institutions (NBFCs).
Have you defaulted in any of your credit card payment? Have you ever given it a serious thought that this minor negligence for whatever reason can cost you hard. All these pool up to evaluate and affect your overall credit score.
The smaller finance mistakes made in the past, that you probably never wondered about can prove really costly at this stage. But, wait its never too late to start! Here we have discussed few crucial and practical steps to improve your CIBIL Score.
You may also like to read: Demat Account: Meaning,Importance & How to Open Demat Account?
How to improve CIBIL Score or Credit Score?
Are you thinking to enhance your credit score? It is not as complicated as it normally seems to be. Just few simple steps to be followed and here you go…you can increase your CIBIL score easily.
1. Avoid Credit hungry behaviour:
We all like enjoying credit card and loan benefits. But, the excess of anything is not good. A number of credit cards nearing the credit limit offered and applying for various loans at a stretch all display your credit hungry behaviour. This needs to be seriously avoided if you wish to build a good credit score. You should maintain financial discipline and apply for a loan only when absolutely necessary.
2. Keep frequency of Applications low:
Too many applications forwarded at a single point of time may hamper your credit score. If your application gets rejected at a particular bank, the information gets recorded in your credit report. So, if you immediately apply for a loan with some other bank, your previous denial may lead to further rejection of loan. What you can do is to wait for sometime before making a fresh application with another bank.
Also, making multiple enquiries from different banks or NBFCs gets recorded, so this may also have an impact on your CIBIL score.
3. Be a responsible credit card user:
This is a strong base to build a high credit score. Clearing all your credit card outstanding before the due date shall positively influence your credit score in the long run. This is the simplest way to improve your credit score. If you already have a credit card, just remember to make timely payments. If you are likely to forget paying, set reminders or automate them. But, don’t miss them!
In future, if you wish to avail a loan facility, all these credit card dues paid on time shall positively impact your CIBIL Score. Any minor defaults can cost you high.
4. Don’t just live on credit:
Simply saying, you don’t have to pay all your bills through credit cards only. Don’t come too close to the maximum limit of your credit card. If you tend to reach the maximum limit very often, your score is likely to come down since this adds up to your credit hungry attitude.
Keep in mind the Credit Utilisation ratio. Experts believe that spending only upto 30% of your credit limit (not more than that) shall reflect positively in your Credit report and boost up your credit score.
5. A good combination of Credits:
You should have a mixed bag of credits when you are in need of it. Just like too many credit cards can affect your score. Similarly, if you have too many unsecured loans that can adversely affect your credit score. Divide between secured and unsecured loans as per your requirements. Credit choices can also affect your score to some extent.
But,remember too much of credits are also not good.So,you should limit yourself to what is essential for you.
6. Pay your past loans on time:
This is applicable in case you already have an existing loan and wish to apply for a new loan for some other reason. Like you have an existing car loan, but now you wish to avail a home loan as well. At this point, your repayment history matters a lot. If you were regular in paying your car loan and didn’t miss any EMIs this will add up to your score.
In case, you don’t have a sound repayment record, this can lower your credit score and make things difficult for you. However, sudden repayments can make your financial records look unstable. The payments made on time in a systematic manner shall positively reflect in your credit score.
7. Check your Credit report regularly:
Checking your Credit report makes you know your present credit score, the reasons for it and where you are lagging behind. So, you can become familiar as to what is letting down your credit score. Where and how you need to fix up the issues and get improve your credit score? If there is any mistake in formation, you can get the same rectified so as to correctly reflect in your credit report.
A high CIBIL score is a clear indicator of one’s spending and repayment habits. Moreover, it signifies a financially disciplined life that one is leading.
Are you planning to avail a loan or grab a good credit card? Have you checked your CIBIL Score? Don’t worry, if you don’t have a good credit score right now. You can surely work upon improving your CIBIL Score. Follow the steps given above and improve your credit history thereby increasing your CIBIL score.
Hope we made you clear as to What is CIBIL? How to improve your CIBIL Score? Can you suggest any other important ways to improve CIBIL score? If yes, feel free to share the same in the comment section below!