What is a CIBIL Score?
The Credit Information Bureau (India) Ltd, popularly known as CIBIL is a Reserve Bank of India (RBI) authorised most reliable CIC (Credit Information Company). It offers CIBIL score and CIBIL report for individuals. A CIBIL score is generated by the bureau after considering an individual’s detailed credit information. Since its establishment, in the year 2000, CIBIL has been collecting and maintaining credit information of Indian residents, also offers credit report services to the banks and other NBFC (Non-banking financial companies). CIBIL scores are calculated on the basis of at least 6 months of historical financial data of an individual. The data is fed into an algorithm with 258 different variables; each with a different weightage.
Benefits of having a good CIBIL Score:
A good credit score makes a person eligible for better deals on loans , gives access to more options. Credit facilities such as a credit card or loan are provided based on the present employment status of the customer also on their CIBIL score.
- Increases eligibility for loans – CIBIL score is the numeric representation of payment history. If you have a good credit score, your chances of getting a loan or credit card is better.
- Gives access to best Credit Cards – Some of the great credit cards require a specific credit score which will be accessible to you only if you have a good credit or CIBIL score.
- Authenticity for a lower rate of interest – Especially in the case of loans, those having a positive payment history and credit score are more likely to get a lower rate on loans in addition to their present repayment capacity.
- To build a credit history – Just in case, you have zero credit history and score, the moment you start using a credit card or paying EMIs, your credit history will build up and so will your credit score. This will make you eligible for better options in the future.
What is a CIBIL Report?
CIBIL report is a single unified document that contains credit history across different lenders. It is a comprehensive report that provides details of an individual’s borrowing history and repayment record. The credit report includes the following information:
- Personal details of an applicant (name, age, gender and address)
- Employment details and earnings
- Number of hard enquiries made by potential lenders on receipt of the loan/credit card application
- Record of previous and current loans along with the payment record
- Any defaults on loan
- The details of settled loans, if any
- Total credit limit and the amount spent monthly (Credit Utilisation Ratio)
- Any credit card payment defaults
- Credit score
Smart Tips to Improve Your CIBIL Score :
- Don’t be a co-signer for a loan unless you don’t need to borrow around the same time
- Avoid acquiring too many debts over a short period of time
- Ensure you repay all your EMIs and credit card bills on time
- Use debt consolidation loans as and when necessary so that your dues aren’t handed over to a debt collection agency
- Be cautious about borrowing loans without a proper repayment plan in place
- Always negotiate your rate of interest with lenders to keep your costs down
- Don’t borrow the entire amount you receive a sanction for
- Choose a shorter loan tenor to repay your loan fast and at a lower interest payment
- Talk to a CA or financial planner to get help on saving taxes and managing your money more efficiently
- If you don’t have any credit history, borrow a small personal loan and repay it on time to build a credit score