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Business News/ Money / Personal Finance/  CIBIL Score: What is it and why is it important? Key questions answered
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CIBIL Score: What is it and why is it important? Key questions answered

A good CIBIL score usually leads to higher credit limits on credit cards, overdraft limits and other lines of credit. Banks and other financial institutions are more likely to offer higher credit limits to those individuals who have a proven track record of repayment of loans.

The CIBIL score typically ranges from 300 to 900 with a higher score reflecting better creditworthiness Premium
The CIBIL score typically ranges from 300 to 900 with a higher score reflecting better creditworthiness

A CIBIL score is a numeric representation of creditworthiness of borrower or investor. It is based on the individual’s credit history and repayment behaviour. 

Range between 300 to 900

The CIBIL score typically ranges from 300 to 900 with a higher score reflecting better creditworthiness. Almost all banks deploy this score as a yardstick to evaluate the risk in lending money to an individual. 

Importance of CIBIL score

Credit limits: A good CIBIL score usually leads to higher credit limits on credit cards, overdraft limits and other lines of credit. Banks and other financial institutions are more likely to offer higher credit limits to those individuals who have a proven track record of repayment of loans.

Faster approvals: Borrowers who have good score usually witness a faster approval process for their loan applications. 

Approval of loans: A good CIBIL score raises the chances of loan approval. Banks prefer to give loan credit to individuals with a higher score as it reflects a lower risk of default.

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Interest rates: Usually banks offer loans at attractive rates of interest to those borrowers who boast a high CIBIL score. So, someone with a high score can easily negotiate better interest rates on loans and credit cards.

Frequently Asked Questions (FAQs):

What is a CIBIL score?

A CIBIL score is a numeric representation of creditworthiness of borrower or investor.

Why is it named so?

CIBIL stands for Credit Information Bureau India Limited, one of the credit bureaus in India, that provides credit information and maintains credit records of individuals and businesses.

What is the range of score? 

The CIBIL score ranges between 300 to 900 wherein a higher score reflects better creditworthiness.

How is it important?

A good score means higher credit limits on credit cards, overdraft limits and other lines of credit and also leads to faster loan approvals, attractive rates of interest and more.

What are the other benefits?

Having a good score may also lead to more favourable terms and conditions on loans and credit products. This may include perks such as lower processing fees, waiver of annual fees and flexible repayment options.

All in all, maintaining a good CIBIL score is important to access credit on favourable terms and managing your finances effectively. It’s important to practise responsible borrowing habits, such as making timely payments, keeping credit card balances low, and avoiding excessive debt, to maintain or improve your CIBIL score over time.

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Published: 04 Mar 2024, 03:42 PM IST
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