Facts To Know About CIBIL Score

India has a booming lending industry. In 2018, more than 6.74 crore people availed credits from various government-backed or private financial institutions. Loans have become a popular method for people to finance their monetary shortcomings. 

However, there are various criteria you have to satisfy to be eligible for a loan from any financial institution. 

One of the most important requirements you need to fulfil is having a good credit score. An average rating of 750 and above assures easy approval of credit. 

What is a credit score?

The credit score of an individual is a 3-digit number ranging from 300-900, summarising your entire credit history. It is published by the Credit Information Bureau of India Ltd. (CIBIL), a government monitored agency. 

Considering CIBIL score is important for personal lending, it should be periodically monitored.  

CIBIL score calculation is done by all NBFCs while approving an applicant for a loan. This is because it represents the creditworthiness of a potential borrower. It also improves your chances of getting a lower interest rate and higher credit limit from financial institutions like Bajaj Finserv.

They provide pre-approved offers that simplify the process of availing credit and help you save time. Pre-approved offers are available on numerous financial products including secured and unsecured credits like home loans, business loans, personal loans, etc. You can take a look at your pre-approved offer by providing your name and phone number.

A high CIBIL score implies that a person poses less risk when it comes to loan repayments – he is more likely to meet his monthly EMI payments. On the other hand, a poor credit score shows that a person has a high risk of defaulting. 

Credit ratings like CIBIL score are calculated based on many different regulations, made to fulfil unique conditions of different individuals. That presents several aspects that every borrower should know. Let’s take a look at some facts regarding CIBIL score.

  1. CIBIL score with no credit history

A person with no credit history does not mean that he/she will not have any Credit score. In such cases, the CIBIL score calculation is done based on past account history. 

CIBIL TransUnion 2.0 ranks such people with a score of -1 or N/A. On the other hand, a person with a credit history less than six months gets ranked on an index of 1-5. People who have a strong financial background are ranked 4 or 5, while risky borrowers are given a score of 1-2. You can use a CIBIL score calculator to determine the exact value.

A person availing a personal loan is required to have a score higher than 750 to ensure a higher chance of approval for credit. 

  1. Applying for multiple credits at the same time

If you apply for various loans at the same time, the number of hard enquiries (when financial institutions enquire about your CIBIL score) made in your name increases. This can adversely affect your score even if you have met all your payment deadlines, and have no defaults in your name. 

  1. Checking your CIBIL score

A person inquiring about their respective CIBIL score for loan does not reduce the value of the same. These are often known as soft enquiries and have no impact on CIBIL score whatsoever. You can enquire about your CIBIL score whenever required to check that there is no discrepancy in the calculation or whether the rating has improved or not. You can visit the official website of CIBIL to learn how to check credit score both online and offline. 

Having a high CIBIL score allows you to get a relatively larger fund. It also gives you leverage over the financial institutions, allowing you to reduce your interest rate or extend repayment tenor. However, having a low CIBIL score doesn’t always mean that you will not be eligible. At the discretion of the NBFC, you have to meet certain specific criteria to avail a loan with a low score.  

Pardeep is an experienced financial analyst, researcher & writer. I have done MBA in Finance. I have worked extensively in the finance sector along with many organizations. I spend most of my time on the Internet reading finance related stuff and love to share my expertise with readers.

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