Here’s all you need to know about CIBIL Score, how it is calculated and how you can build a credible CIBIL Score.
What is CIBIL Score?
Reflecting a person’s credit profile, CIBIL Score is one of the most important factors determining whether an individual will get access to much-needed credit or not.
CIBIL Score is simply your Credit Score. It is expressed as a three-digit numeric summary of a consumer’s credit history.
How is CIBIL Score calculated?
Capturing a consumer’s creditworthiness, CIBIL Score is based on an individual’s past credit behaviour, such as borrowing and repayment history which is shared by banks and lenders with CIBIL regularly.
Taking into account several macro-level credit trends, CIBIL Score is based on 36 months of a consumer’s credit history. Importantly, four key factors impact a consumer’s CIBIL Score. These include payment history, credit mix of secured or unsecured loans, enquiries and credit utilisation.
With the advancements in technology and evolving algorithms, CIBIL Score is also derived on the basis of consumers’ long term trend of outstanding balances, transaction history on credit cards, the ratio of actual repayment amount to total amount due and new accounts opened/closed.
What is a good CIBIL Score?
A three-digit number, CIBIL Score ranges from 300 to 900.
For most lenders, the minimum CIBIL score required to approve a personal loan ranges between 720 and 750. A higher CIBIL score increases your prospect of getting the required credit. A lower score hurts consumers’ chances of availing a loan.
Why do lenders check consumers’ CIBIL Score before lending?
CIBIL Score measures your creditworthiness. And a lender chooses to check your Score for several reasons including:
To check consumers’ (borrower) credit record and history
For determining consumers’ capacity to repay the loan
To identify if a potential borrower meets the lender’s loan eligibility criteria
Calculating the loan amount and interest rate suitable/applicable to a borrower
How to check your CIBIL Score?
Using a simple Google search, you can opt to check your CIBIL score for free online by using the services offered by several financial service providers and lenders.
Most of the players online don’t need consumers to log in or register to calculate their CIBIL score. You can check your CIBIL Score on such websites by providing some basic information including (user mobile number and email ID), verify your identity by confirming the OTP sent to your mobile number and email ID, and check your CIBIL score and report.
How can I work towards building a positive credit profile?
CIBIL Score is built on your credit history and past payment behaviour. So be careful how you manage your finances as it will impact your capacity to access finance in the future.
You can simply follow these steps to build a strong credit profile:
Pay your bills on time. Delays in payments are viewed negatively by lenders
Strive for a healthy credit mix comprising secured (home loan and auto loan etc) and unsecured loans (such as personal loan and credit cards) because lenders view too many unsecured loans negatively
Be careful as you stand guarantee to a family member, friend, etc or with those whom you hold bank accounts jointly. Because you are equally liable for missed payments, your joint holder's (or the guaranteed individual’s) negligence in payments could affect your ability to access credit when you need it the most.
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