The CIBIL score is a 3-digit number ranging from 300 to 900 assigned to every individual who has availed a loan or a credit card. It reflects their creditworthiness and how capable they are to make the repayment without defaulting.
At present, Experian, Highmark, Equifax, and Credit Information Bureau (India) Limited provide the credit score. CIBIL is the most preferred bureau which is partnered with more than 2,400 lending institutions. Hence, the credit score provided by this company is accepted by the majority.
Following are a few facts about your credit score you should know about:
- It is based on your credit report
Your credit report contains various details like:
- Personal information
- The total amount of credit you availed
- Types of credits availed – loans or credit cards
- Outstanding credits
- Overdue payments
- Number of days a payment is late
- Settled or written off credits
- Credit enquiries
Some of the factors mentioned above have direct impacts on your credit score. For example, overdue payments can decrease your score. On the other hand, paying your loan EMIs in time will significantly improve it.
- Credit companies avail information from lenders
Credit companies collect the information in your credit report from lending institutions. It takes about a month for a particular data to get updated in your report. Hence, sometimes, your credit report may contain inaccuracies too. Therefore, ensure to review your credit report from time to time.
- It is a crucial eligibility criterion for availing loans
Your credit score is one of the significant personal loan eligibility criteria. Financial institutions give preference to those having a credit score of 750 or more.
- You may receive a loan with a low credit score
Around 80% of applicants who avail an unsecured loan have a high credit score. Lenders may sanction you a loan even if you have a low score provided your other eligibility criteria are satisfactory. For example, you have a high income, a job with a reputed organisation, etc.
You also have to know how to apply for personal loan, fulfil the eligibility criteria, and provide the necessary documents.
- The credit score differs from companies
The credit score provided by each of the credit information companies mentioned above may vary with the other. All of these institutions implement different algorithms to calculate the score.
- You can improve your credit score with a credit card
If you don’t know how to improve the CIBIL score, the answer is a credit card. Using a standard credit card regularly, paying the total amount due in time, and keeping your credit utilisation under 30% will increase your score.
Also, refrain from closing your old credit cards. An old credit card with a sound credit history will increase your score.
- Credit companies never make changes to your credit report
Credit companies only add the information they receive from lenders. Neither do they make changes nor do they delete any data from your credit report. They can only make modifications to your report under authorised instructions. You can report an error or mistake in it directly to the company.
- Checking your score does not lower it
Credit companies enable you to check your credit score unlimited times without reducing it. These are known as soft enquiries and have no impact in your score.
On the other hand, financial institutions conduct hard enquiries on your credit score when you apply for a loan or a credit card. Hard enquiries will decrease your score.
Hence, it is recommended not to apply for multiple advances as it will negatively impact your credit score.
- A high credit score may help you get lower interest rates
Lenders may offer you low interest rates on personal loan compared to other borrowers if you have a CIBIL score higher than 750.
- You can check your score for free every year
CIBIL lets you check your CIBIL score once per year for free. You have to pay a fee when doing so more than once a year. Also, you may be able to check it through an NBFC even when not availing a loan or a credit card.
Perform regular checks on your credit score and report to stay updated. Improve it to receive higher personal loan and credit card limits.