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Business News/ Brand Stories / Navigating the complex world of credit through the lens of CIBIL score

Navigating the complex world of credit through the lens of CIBIL score

Understanding the complexities of the financial system and having a good CIBIL score is important for easy access to credit.

In the webinar titled ‘National Consumer Credit Awareness and Financial Inclusion Program’ TransUnion CIBIL provided insights into the world of credit.Premium
In the webinar titled ‘National Consumer Credit Awareness and Financial Inclusion Program’ TransUnion CIBIL provided insights into the world of credit.

The evolving financial landscape is continually undergoing change, and financial uncertainties can arise unexpectedly. In such times easy access to credit becomes an important aspect of one’s financial portfolio. However, this accessibility is tied to one’s ability to understand the complexities of the financial system, often assessed through the lens of CIBIL score.

Understanding the world of credit can often appear complex at first glance, yet, it is key to securing one’s financial future. In a recent webinar titled ‘National Consumer Credit Awareness and Financial Inclusion Program’ Bhushan Padkil, Senior Director and Head of Consumer Interactive (Direct-To-Consumer) India, TransUnion CIBIL, provided insightful perspectives to peel off the layers of complexity surrounding credit and provided an understanding of credit management.

Decoding CIBIL score and report

CIBIL score is a three-digit numeric summary that reflects creditworthiness based on credit history and repayment behaviour. It ranges from 300 to 900, with a higher score indicating better creditworthiness. The CIBIL report, on the other hand, provides detailed information about credit accounts, payment history, and any defaults or late payments reported by member banks and financial institutions. Whatever stage of life you may be at, CIBIL score and report play a key role in helping plan for a better future.

“The cycle of good credit is centered around the idea that our past credit behaviour plays a crucial role in shaping our future credit opportunities and we can do more ourselves… to know more about your past credit behaviour, monitor your CIBIL score and CIBIL report regularly. Note that when we apply for a loan or any credit facility, lenders carefully assess our credit history to determine our financial health and creditworthiness," said Padkil.

Debunking the myths around CIBIL Score

One of the common myths around CIBIL is that checking your credit score will lower it. Addressing this myth Padkil said, “This is not true at all… In fact, checking your own credit score or CIBIL score is considered a responsible practice and has no impact on your score whatsoever."

Another myth is that the CIBIL score is based on one's financial portfolio or the amount of money one has in a savings account. “Your CIBIL score is not based on your savings account, Demat balance, or investment portfolio at all. The score is purely based on your credit profile, making payments on time, limiting your credit utilization, and applying for credit only when you need it helps you build a positive credit profile," said Padkil.

Establishing credit from scratch

No one is born with a credit history; it's a foundation we must construct. The good news is that the CIBIL score and report start taking shape as soon as the process of using a credit product is initiated. Now, let's look at some ways to initiate and build a CIBIL score:

  • Apply for a Consumer Durable Loan: If you are new to credit, lenders won't have a history to reference for granting a loan. You can start your credit journey by applying for a consumer durable loan, perhaps for a smaller item like a smartphone purchased on EMI.
  • Apply for a Credit Card from Your Salary Account Bank: A credit card from the bank where you hold your salary account boosts your chances of securing a credit card.
  • Explore Secured Credit Cards: Secured credit cards are linked to a fixed deposit, with the deposit amount determining your credit limit. This approach provides a secure foundation for building credit responsibly.

Exploring ways to build a good CIBIL score
As we conclude, it's crucial to highlight the significance of building a good CIBIL Score. Responsible credit management, timely payments, and prudent credit utilization are important aspects of a positive credit profile. The journey towards financial well-being and creditworthiness is long, and the National Consumer Credit Awareness and Financial Inclusion Program webinar offered ways that can help you build a good credit score.

“Improving your CIBIL score requires effort but it’s definitely achievable… You have to make sure that you are paying your loan EMIs & credit card dues on time, every time! Late or missed payments even once can have a negative impact on your score," shared Padkil. Another point emphasized at the webinar was regularly checking one’s CIBIL score and report to stay informed about credit health and taking necessary steps to improve it if needed.

Disclaimer: This article has been produced on behalf of the brand by HT Brand Studio.


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Published: 28 Dec 2023, 11:29 AM IST
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