CIBIL Score Demystified: A Comprehensive Guide to Your Credit Health

CIBIL Score

Unlock the secrets of your financial health in India with these insights into CIBIL Score and discover effective strategies to increase your creditworthiness for a robust credit profile.

Small-ticket loans have increased in the last two years for a variety of reasons. Job losses, wage reductions, medical emergencies, rent deposits, upskilling courses, and other comparable factors prompted millennials to seek such loans. Short-term loans in cities also increased as a result of constrained economic activity, resulting in financial distress. 

Your CIBIL score will determine the type of credit you can obtain. The greater it is, the more creditworthy you are in the eyes of a lender. So, what exactly is it? Your CIBIL score is a three-digit figure that lenders use to determine how risky a borrower you might be. The higher your score, the more likely you are to be approved for loans/credit cards with competitive interest rates. A CIBIL report – a complete description of your credit profile, access and repayment history, credit accounts, and balances – backs up your CIBIL score. A clean and timely payment history should logically result in a higher score, and vice versa. 

Why are all of these ideas—CIBIL report, CIBIL score, and credit access—important at all? Because credit now affects practically every area of our life, such as purchasing a home, starting a business, or enrolling in higher education. Credit is now a way of life, and it is deeply ingrained in our spending habits. 

What does CIBIL Credit History and Credit Report mean? 

When applying for a loan, you must first determine your CIBIL score. Will I be able to obtain credit? Your bank will examine your credit history and create a credit report to determine your creditworthiness.  

A credit history is a record of debt payments made by a borrower. A credit report is a record of a borrower’s credit history that can be accessed from a variety of sources, including banks, credit card companies, collection agencies, and governments. A borrower’s credit score is the result of a mathematical algorithm that analyzes credit information to predict their level of creditworthiness.

Building a CIBIL credit score is a gradual process, typically requiring 18 to 36 months or longer of consistent credit utilization to attain a satisfactory credit rating.

Why does the CIBIL Credit Score Matter? 

A borrower’s credit history comprises their repayment record, while a credit report, obtainable from entities like banks, credit card companies, collection agencies, and governments, details this history. The credit score, derived from a mathematical algorithm analyzing credit information, predicts the borrower’s creditworthiness. If the CIBIL score is poor, the bank may reject the application entirely. A high CIBIL score prompts the lender to scrutinize the application and assess additional factors in order to ascertain the creditworthiness of the applicant. 

The CIBIL score is the lender’s first impression; the higher the score, the more likely the loan will be assessed and approved. The bank makes the decision to lend, and CIBIL has no say in whether or not the loan/credit card is accepted.   

A score of 700 is considered good. 

Credit Score Range CIBIL Score Creditworthiness Probability of loan approval 
Less than 600 Urgent action demanded Extremely Low 
From 600 to 649 Highly doubtful Hard even with high interest 
From 650 to 699 Just satisfactory Possible 
From 700 to 749 Good Good 
From 750 to 900 Strong Very High 

How to enter the CIBIL system? 

Creating an account on the official website, CIBIL.com, is the first step in registering oneself or their firm on CIBIL. After creating an account, you must upload papers such as identity and address proofs, utility bills, and so on. It is critical to keep track of your credit score once you have registered. To keep a strong credit score, make timely loan payments, choose deferred payments, conduct regular credit score checks, and make timely credit card payments. 

Frequently Used Terminologies for Credit Report Analysis   

When reviewing your credit report, it’s critical to comprehend the following terms:   

  • Credit Score: A numerical score based on your credit history and behaviour that shows your creditworthiness.   
  • Credit Report: A complete report outlining your credit history, including credit accounts, payment history, and other information.   
  • Credit Utilisation: The amount of your available credit limit that you are currently using as a percentage.   
  • Payment History: A record of your previous credit account payments, including any missed or late payments.    
  • Credit Inquiries: A list of businesses that have requested your credit report.   
  • Derogatory Marks:  Negative information on your credit report, such as late payments, defaults, bankruptcies, or foreclosures, is referred to as a derogatory mark.     
  • Collection Accounts: Unpaid debts forwarded to a collection agency.   
  • Public Records: Legal activities that can affect your credit score, such as bankruptcies or judgements.   

How can I keep my CIBIL Score High?    

You can maintain a high CIBIL score by following these simple steps:  

  • To maintain a solid track record, pay your EMIs on schedule.   
  • Carry a credit card that you rarely use. Unused credit cards should be cancelled.    
  • Set up credit card payment reminders or limit your use to one credit card.    
  • Avoid reapplying for loans or credit cards for which you were denied the first time.     
  • Do not submit an excessive number of loan applications in a short period of time.     
  • Long loan terms should be chosen with caution, and part payments should be made wherever possible.    

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