Everything You Need to Know About CIBIL Score

09 July 2024
Everything You Need to Know About CIBIL Score
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A CIBIL Score is a 3-digit score provided by the Credit Information Bureau India Limited (CIBIL) based on the summary of your credit history and your repayment behaviour. Having a high CIBIL score allows you to apply for loans easily with a lower interest rate. Scroll through this blog to know about CIBIL score in a detailed manner. 

What is CIBIL Score?

A CIBIL score is a numerical indicator of your credit history, showing your creditworthiness. It helps lenders know whether you are a low-risk or high-risk borrower. When you apply for credit, your CIBIL score is one of the key factors considered. 

A CIBIL score ranges from 300 to 900. Usually, a score above 750 is considered a good CIBIL score, and around 79% of loans for these people are approved. Your CIBIL score is determined by aspects like your payment history, credit activities, credit risk, the types of credit you use, and the duration of your credit history.

Check Your CIBIL Score

Why is a CIBIL Score Important?

A CIBIL score is considered important for various reasons, which are as follows: 

  • Creditworthiness

Your CIBIL score is a key indicator of your creditworthiness, showing how well you manage your finances. A high score means you have a good credit history, which makes you more likely to get approved for loans. 

To maintain a high score, it is important to pay all your bills and EMIs on time. Any missed EMIs or payments can impact your CIBIL score, making it difficult to get approval for loans.

  • Loan and Credit Card Application

When you apply for loans or credit cards, lenders look at your CIBIL score to know your credit history. A high CIBIL score indicates that you repay loans on time, improving your chances of approval for different loans and credit cards. 

Conversely, a low CIBIL score, often due to late payments or high debt, can lead to rejections.

  • Low Interest Rate Loans

A good CIBIL score can help you secure lower interest rates on loans. Banks prefer to offer better rates to customers with high credit scores, as it reduces their risk. Lower interest rates mean you pay a lesser amount as interest during the duration of the loan, which can significantly improve your financial health.

  • Increased Loan Amounts

Your CIBIL score also affects how much you can borrow. A higher score often allows you to qualify for larger loan amounts. Whether you want to buy a car or a home, a good CIBIL score can help you get the required funding that you need.

  • Longer Loan Tenures

A good CIBIL score can also enable you to get loans with longer repayment periods. Longer tenures can make monthly payments more manageable, though they may come with higher interest rates. Still, having the option for extended repayment terms can provide greater financial flexibility.

What is a CIBIL Score Range?

The table below explains what each CIBIL score range means and what each CIBIL score signifies: 

CIBIL Score Range

CIBIL Score Ratings

Significance

Below 300

Poor

No or very limited credit history, making it hard to judge creditworthiness.

300-550

Very Low

High chances of rejection due to the high risk of defaults. Need to build a good credit score.

551-620

Low 

Poor credit history and needs improvement for better loan options.

621-700

Fair 

Close to a good credit score and manages credit responsibly.

701-749

Good

It shows responsible credit usage and makes you eligible for good loan terms.

750-900

Excellent

Top credit score, qualifying you for the best loan offers and financial products.

How is the CIBIL Score Calculated?

Your CIBIL score is calculated based on various factors, which are mentioned in the table below: 

Factors Affecting CIBIL Score

Factors

Description 

Weightage 

Repayment History

It reflects your loan repayment behaviour. Paying your credit bills on time can significantly boost your CIBIL score.

35% of the score

Credit Balance and Utilisation

The credit utilisation ratio is calculated based on the outstanding balance on your loans or credit cards. If you have used most of your credit balance, lenders may see you as a risky borrower. A good utilisation ratio is 30%, meaning you have only used 30% of your credit limit.

30% of the score

Length of Credit History

The longer and more consistent your history of managing credit, the better it reflects on your score.

15% of the score

New Credit

Each time you apply for a new loan or credit card, it leaves a mark. Too many loans/credit cards can negatively impact your score. 

15% of the score

Credit Mix

It reflects the variety of credit types you use. A balance of secured loans (like a mortgage) and unsecured loans (like credit cards) shows that you can handle different types of credit responsibly. A diverse credit portfolio is a plus in the scoring model.

10% of the score

How to Check CIBIL Score Online?

Below are the steps you need to follow to check your CIBIL score:

Step 1: Visit the official CIBIL website.

Step 2: Under ‘Free CIBIL Score & Report’, click on ‘Get Started Now’.

Step 3: Log in to CIBIL by providing your full name, email ID and password.

Step 4: Attach an ID proof such as your passport number, Aadhaar card, PAN card or Voter ID card in the ID type section. 

Step 5: Next, provide your PIN code, date of birth and phone number.

Step 6: Tap on the 'Accept and Continue' button.

Step 7: Provide the OTP that you will receive on your mobile phone and press the 'Continue' button.

Step 8: Choose ‘Go to Dashboard’, log in to your account, and check your credit score.

Step 9: You will be taken to myscore.cibil.com and tap on ‘Member Login’. 

After logging in, you can view your CIBIL score.

Conclusion

Now that you know about CIBIL score and its significance in your financial life, you can take proactive steps to maintain or improve it. Maintaining a high CIBIL score is essential for securing favourable loan terms and managing your financial future. Moreover, you must stay informed about your CIBIL score and use it as a tool to achieve your financial aspirations with confidence and stability.

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