In today’s times, consumers often turn to credit cards and loans to help them achieve their financial goals and dreams. The CIBIL™ score is a vital factor which helps in getting access to this much-needed credit.
What is a CIBIL score?
A CIBIL™ score is a consumer’s credit score. It is a three-digit numeric summary of a consumer’s credit history and a reflection of a person’s credit profile. This is based on the credit behavior of the consumer in the past, including the borrowing and repayment regularity as shared by banks and lenders CIBIL™on a regular basis.
The score is based on the details found in the ‘Accounts and Enquiries ‘ section of the CIBIL™ report and includes loan accounts, credit cards, outstanding amounts, payment statuses and days past the due date.
A person’s past credit history is taken as an indicator of his future actions and in line with that; the CIBIL™ score showcases a consumer’s creditworthiness. When a person applies for a credit card or a loan, one of the important factors that lenders check is the credit profile as stated by the credit score.
How to check your CIBIL™ score?
The procedure to check your CIBIL™ score is as follows:
Step 1: Log on to the official website of TransUnionCIBIL™.
Step 2: Navigate to the ‘Personal’ tab and click on the ‘Get Yours Now’ button, for a
Credit score. However, you need to pay the specified charges for any
Step 3: Consider you have opted for a free CIBIL™score. You are directed to a page
which will prompt you to enter your personal information to sign up as the first
step. In the next step, you will have to verify your identity with a government
Issued identity proof.
Step 4: You can sign in to your account if it already exists on the site.
Step 5: Your credit score will be sent to you via the email address entered by you during
What are Good and Bad Scores?
- A CIBIL™score between 850- 900 shows that you have never defaulted and constitutes an excellent credit score.
- It is a well-laid-out fact that 79% of the loans sanctioned are for people with a credit score of 750+. Also, scores above 800 are considered high and can easily avail lower interest rates on personal loans and credit cards.
- A CIBIL score of 700-750 is considered a good score for secured loans. However, for unsecured loans, the bank might consider your social score or have slightly higher interest rates.
- A score between 500-700 indicates a default a few times in the past, which will lead to hefty interest rates.
- A score of 300-500 points to too many discrepancies in past loan repayments and may not be eligible for any further credit.
How to work toward a positive credit score?
Your CIBIL™ is a reflection of your credit history and past payments but will impact your access to future credit. You can take steps to build a healthier credit score by following these steps:
- Always be financially disciplined and pay your dues on time.
- Control your credit utilization and keep your balance payments low.
- Maintain a healthy mix of secured and unsecured loans as too many unsecured debts like credit cards are viewed negatively.
- Closely monitor your co-signed, guaranteed or jointly held accounts where you are jointly held liable for any missed payments, which could affect your credit score and the access to credit when you need it.
- Review your credit history regularly throughout the year. Also, monitor your CIBIL Score and Report regularly and report any inaccuracies. In case of any inaccuracy, you can raise a dispute on the CIBIL™website or request the lender to report the correction to CIBIL™.
How to improve your Credit Score
- Set reminders for payments and be credit disciplined
Repayment of outstanding debt can have a significant impact on your credit score. This is why you need to maintain credit discipline by ensuring timely repayment of EMIs. Any delay can affect your credit score adversely.
- Maintaining older credit cards to lengthen credit history
If you have old credit cards, you should continue to maintain them as long as possible to help in building a solid and lengthy credit history, which helps in maintaining a good credit score.
- Avoid availing too much credit at a time.
If you take multiple loans at once, it will show that you are trapped in a cycle of insufficient funds, which affects your credit score adversely. On the other hand, if you take a loan and repay it successfully it goes a long way in boosting your credit score.
- Note your Credit Utilization Ratio
Ensure that you do not utilize your credit card for every transaction. Maintain a total credit utilization ratio of 30%, to see a positive impact on your credit score.
- Maintain a low frequency of credit applications
A major reason to avoid making multiple applications for credit is that every time such an application is made the bank will require a credit report from CIBILTM. Such multiple enquiries by the bank will reduce your credit score and also portray you as credit hungry
- Avoid settling loans or credit
Settling is a process in which a bank allows a person to settle or close a debt at an amount less than the actual amount of debt. This has an adverse impact on your credit report and may even have a negative impact on the bank’s willingness to offer fresh credit.
- Opt for a different type of Credit
Credit, if used carefully, is financially beneficial for a person to build a good credit score. You can improve your credit history and also your CIBIL score by taking fewer loans and including a mix of secured and unsecured loans, as well as long-term and short-term loans. Such a variety of loans and their timely repayment will go a long way in improving your CIBIL score.
- Pay your credit cards on time
The best way to effectively use a credit card is to make timely payments and never come close to your total available credit limit. Another important thing to ensure is that you pay the total amount due on the card or at least a significant amount, but never only the minimum amount due.
- Don’t keep applying for credit if rejected
In case you have applied for a loan or a credit card and have been rejected, it will reflect on your credit score. The best way to handle such a situation is to wait for your credit score to improve before making any re-application.
Your credit score is as important as any other factor while borrowing credit. Keep your scores high and enjoy more affordable credit options.