cibil score

What Is CIBIL Score? This Session Will Tell You

Finance

Can you live your dream without any financial support in today’s monetary world? Quite expectedly, No, isn’t it? Be it the case of roaming on the sandy beaches of Barcelona to getting your daughter wed in the grandest manner possible, most, if not all, rely on a loan to fulfill their respective dreams. But the game spoiler for most has been a poor CIBIL score.

As they say, you must deserve to get. Similarly, you must obtain a good credit score, which determines one’s creditworthiness, to be able to grab a loan. So, what is CIBIL score and what role does it play to let you fulfill your dreams? Well, to find the answer, you must take a look at this article.

CIBIL Score – An Indicator of Your Repayment History

The manner in which you repay your present or had repaid the past debt would greatly determine your CIBIL score. CIBIL, arguably a leader in India’s credit information space, provides credit scores to individuals with a repayment track of at least 6 months to a year. Normally, the score that it assigns to individuals, ranges from 300-900. So, those getting a score of 750 and above would most likely get an approval to their credit application. Even those between 700 and 749 can hope for an approval. However, a score below 700 may not make lenders tick the application.

How Does CIBIL Assign You a Credit Score?

CIBIL assigns you a credit score based on the monthly reports that the lenders send to it. The reports let the CIBIL know your repayment track in terms of how good or bad you have been while servicing the debt. So to know whether or good or bad on the repayment front, CIBIL checks your payment schedule, the amount of debt you are under, any instance of late or skipped payment, the extent of credit utilization, etc. Based on how you may fare in these parameters, CIBIL will assign a score to you. On a general note, it can be said that those paying on or before time would most likely get a good credit score. Those not adhering to the timely payment principle may have to settle for a lower score, which could potentially dash their fresh credit hopes as well as their dreams.

What Could be The Possible Cause of a Poor CIBIL Score?

A credit score can worsen on account of the following sins you may commit to your debt, intentionally or unintentionally. Let’s find out those sins below.

No Adherence to Timely Payment Assume you are new to the corporate arena and got a credit card to dine and enjoy several other privileges that the plastic money enables. Being new can tempt you to spend beyond your limits and so can result the constant late payment of the bills. This, arguably, is the biggest reason for a dent in one’s credit score.

So, don’t be too swept away by the purchasing power of credit cards and use discretion in your plastic money spends. The more discretion you show on your spends lesser the bill will be to ensure a smooth repayment.  

Fast Bumping Out the Credit Limit – Excessive credit card spends can take out a heavy chunk of the limit, thereby making default a possibility. Fearing the possible default, CIBIL can cut your credit score. The impulsive spending urge, which one can have, leads to bumping out the credit card limit. You should thus maintain a credit utilization of around 50% by controlling your impulsive urge.

Paying Only the Minimum Due One always find an escape from the sin that he/she commits. The same happens in the world of credit cards where shoppers go wild in their spends to only inflate the bills to a considerably higher amount. But, what the credit card companies do? They provide the ‘Minimum Due’ teaser on the credit card statement. The fact that a minimum due is calculated at about 5% of the overall outstanding balance in a billing cycle makes it easy for the shoppers to pay. But, by doing so, you fall into a never-ending debt trap as interest and taxes keep adding to the bills to get even the minimum due become larger by the month. This can create a default situation. And so, the score comes down.

Srishti Singh is a professional financial writer who has written on various financial products like personal loans, home loans, credit cards & mutual fund investment, etc. She believes in delivering best of her knowledge so as to help the readers understand the product and be aware of their financial decisions.

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