CIBIL Score: Everything you need to know about CIBIL Score in 2022
CIBIL score is the deciding factor for your loan application. If you have bad credit history and a low credit score, your loan application will likely be rejected.
What is the CIBIL Score?
CIBIL stands for Credit Information Bureau (India) Limited. This company is the most popular RBI licensed credit card information company. CIBIL obtains the data from its associate partners, including banks and credit institutions.
A monthly Credit Information Report (CIR) and CIBIL credit score are prepared for each individual based on information provided to CIBIL. Upon request, this report is then delivered to credit agencies to assist them in evaluating and approving loan/credit applications.
An individual’s CIBIL score is a three-digit numerical summary of their credit history, rating, and report. It ranges from 300 to 900. The closer your credit score is to 900, the better your credit rating.
Why is your CIBIL score important?
“First impression is the last impression.” This is a quote we frequently hear about the importance of first impressions. The same applies to your CIBIL score. It is the “first impression” of your loan application. The CIBIL Score plays a critical role in the loan application process. The lending institution first asks an individual seeking a loan: What is your CIBIL score?
The CIBIL score serves as a first impression for the lender; the higher the score, the greater your chances of the reviewed and approved loan. If the CIBIL score is high, the lender will review the application and examine additional factors to decide whether the applicant is creditworthy. The bank may not consider your application if your CIBIL score is poor.
How to calculate CIBIL Score?
To access your CIBIL Credit Report, you need to fill out the ‘CIBIL credit score request form.
Step 1: Here are the subscription plans you can choose from:
A Bi-Annual Subscription for 2 Score Reports (Rs. 800)
Monthly Subscription with four score reports (Rs.1200)
Step 2: Enter your PAN, email address, date of birth, and gender.
Step 3: Enter the displayed characters in the given box.
Step 4: Tick the box beneath ‘I acknowledge and accept the Terms and Conditions applicable and available on the site.’
Step 5: Click ‘Proceed to Payment.’
After you complete the payment, you will be redirected to an authentication page. You will be asked to answer five questions about your credit history. Your identity will be validated if you answer at least three questions correctly. The credit report will be delivered to your email address within 24 hours.
If authentication fails, you can submit a paper copy of the application, together with your address proof and the CIBIL id, to CIBIL. The credit report will then be mailed to you at the address you give.
How can you increase your CIBIL score?
The CIBIL score ranges from 300 to 900. A score of 300 to 549 is considered flawed, while a score of 550 to 700 is deemed average. A personal loan requires a CIBIL score of 700 or above. Anything less than 700 might be a reason for concern.
Although the CIBIL score cannot change overnight, some changes in your financial habits can significantly improve your CIBIL score over time. Let us look at the steps that can increase your CIBIL score.
1.Find your CIBIL Score:
The first step before planning is to know where you stand. From the above-given method, find out your score and plan accordingly. Additionally, by reviewing this score, you can determine if it is factual and identify any errors, if any. Correcting mistakes immediately could lead to a quick increase in score.
2.Repay your dues on time
Not only does late payment cause extra charges, but it also costs you your credit score. Delaying any payment- credit card or loan EMI can cause a significant dip in your CIBIL score, a late payment fee in India can range from Rs.400 to 1,300. So, paying your dues on time not only prevents interest from mounting but also ensures an excellent CIBIL score.
3.Increase your credit limit
By increasing your credit limit, you lower your credit utilization ratio, boosting your credit score. In simpler words, when you over-utilize your credit score limit, you are categorized as a “high-risk borrower,” and thus, your credit score is impacted negatively. So, it is advised to increase your credit limit before any additional spending to avoid a bad CIBIL score.
4.Show variety in your credit
This step will be essential to get a loan for a higher amount at a lower interest rate. If you have not obtained any form of credit, you will likely have a low CIBIL score, and the loan-getting process will be challenging. It is recommended that you include a mix of personal and secured loans and long and short-term loans in your credit portfolio to improve your credit score.
5.Limit your card purchase
Using more than 30% on your credit card is considered high credit utilization and can lower your credit score. Not using your credit card too can have a negative impact on your CIBIL score. So it is imperative to use your credit card carefully. Always try to use 30% of your credit card; in case of higher purchases, consider the above option of increasing your credit limit.
6.Avoid many credit cards.
Do more credit cards mean more CIBIL Score? Absolutely not. Credit cards are helpful when applying for loans, but having too many credit cards and making too many high-value purchases may prove counterproductive. This is because not only spending too much on your credit card but also applying for credit cards from many banks can negatively influence your credit score. When applying for a credit card, it’s a good idea to check your credit score and apply to banks where your loan application has a greater chance of getting approved.
7. Keep your score in check
Lastly, remember to check your CIBIL score on regular intervals. According to a study conducted by the Federal Trade Commission in 2012, approximately 20 percent of consumers had errors on their credit reports. The same study conducted in 2015 found that customers who reported an unsolved error still believed the report was incorrect. So from the above mentioned step keep a check on your score and look out for any error.