Importance of Cibil Score

CIBIL score is an important factor that is considered by lenders at the time of offering you a loan or credit card. It is a numerical summary of your credit history and repayment behaviour.

What is a CIBIL score?

A CIBIL score is a 3-digit number that ranges between 300 and 900. It measures your ability to repay the borrowed amount. An ideal score is one that ranges from 750-900. Your score should be closer to 900 to get better access to credit products such as credit cards and loans. If you have a high score, it suggests that you have been a responsible borrower.

What is your CIBL score made up of?

There are four main factors that make up your score:

Payment History 30%
Credit Exposure 25%
Credit Type and Duration 25%
Other Factors 20%

What are the Factors that Don’t Affect your CIBIL score?

Your score is affected by many factors in addition to payment history and credit exposure, among others. However, there are some factors that will have no impact on your score. Here’s a list of them:

  • Checking your own credit score
  • Savings Account
  • Fixed Deposit
  • Debit Card
  • Income
  • Overdraft
  • Cheque bouncing
  • Education

Why is your CIBIL score important?

Your score is a snapshot of your credit health. It gives lenders an idea of your ability to repay the borrowed amount.

  • Know your Credit Status:
  • When you check your score and report, it tells you where you stand and what you need to focus on. Your CIBIL report is a summary of your present and past credit transactions. Checking your report regularly also helps report and rectify any discrepancies that have lowered your score through no fault of your own.

  • Makes you Eligible for Loans
  • Generally, financial institutions and lending platforms consider a CIBIL score of 750 and above as ideal. Hence, it is important to build credit history and get a score as it makes you better eligible to apply for credit under great terms. If you have no credit history and no score, it becomes difficult for lenders to assess your creditworthiness.

What are the Advantages of a High CIBIL score?

  • Cheaper interest rates on loans
  • Cards with better benefits and rewards
  • Avail pre-approved loans
  • Loans with longer tenure
  • Quicker approval on credit applications
  • Negotiation power
  • Discount on loan processing fees and other charges
  • Higher credit card limit

Check your CIBIL score for Free

In early 2017, the Reserve Bank of India (RBI) made it compulsory for all the credit bureaus in the country to offer one free detailed credit report per calendar year. You can visit the official website of CIBIL and get your free CIBIL score and report.

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