A CIBIL score is essentially an individual's credit report underlining the credibility and
trustworthiness of that person's credibility and reliability regarding financial aspects. It is a
score that is used by the governments and banks to assess a person's loan paying capability
and his/her attitude and commitment towards it.
What is a CIBIL score?
CIBIL is three digits calculated on the ground of financial transactions relating to an
individual. Banks and leading financial institutions allot a CIBIL score to an applicant. It
signifies the applicant's ability to repay the loan within the stipulated time frame.
The range of the CIBIL score is 300-900. A person with a higher CIBIL score gets easy access
to attractive loan schemes. According to research conducted by CIBIL, 79% of the approved
loans are for persons with a CIBIL score of 750 or more.
History of CIBIL score
It was in 2007 when CIBIL initiated the credit score module in India. This financial
organization started offering credit scores to individual customers in 2011.
Factors determining CIBIL score
A good CIBIL score is the interplay of several factors. The factors determining your CIBIL
score are listed below:
- Credit history
- Payment records
- Credit types
- Number of loan accounts
- Outstanding loan amount
The CIBIL score for different banks is different. Instances are there when applicants with less
than 550 CIBIL scores have also been granted a loan.
How to check your CIBIL score
Checking your CIBIL score isn't tough. Just log into your account from the official CIBIL page.
After the payment, you can access your account from where you can check your CIBIL score.
For your convenience, you have the option to download your entire credit report. You also
get the necessary insights regarding the improvement of your credit score.
Importance of CIBIL score
The significant benefits of having a good CIBIL score are listed below:
- Ensures an easy loan: High scores in CIBIL reflect your better financial capacity with cash and debit. It also showcases that you are quite capable of paying off a loan without any legal intervention or implications. In other words, it acts as financial insurance. People with good CIBIL scores get loans from both government and private banks pretty quickly. If you have paid your previous loan without any hassle, the bank will likely approve your next loan faster by looking at your scores.
- Lower rates of interest: The quicker you pay off any loan, the higher your score gets. As a result, the next time you decide to apply for a loan to buy a vehicle or renovate your home, the bank will offer you a lower interest rate than usual. This happens because the CIBIL score acts as a goodwill document. It is like the character certificate of your financial capabilities, and by lowering the interest rates, the bank is rewarding you for your past economic behavior. It is a boon when a person has applied for a loan involving a lump sum amount and will be paying the EMI for a good many years.
- Power of negotiation: Rising your esteem in the eyes of CIBIL authorities will land you with space where you can negotiate with the bank authorities on the aspects of the duration of payments, each monthly installment, and the total amount of loan issued. As you further attain better scores, this window of negotiation broadens. Usually, the bank officials are very strict with the people regarding the loan terms and conditions. But people with higher scores are approached by the banks' higher officials, and those banks are willing to be flexible for those people.
- Credit limit: As a person pays off their loan and increases their credit score, the credit limit or loan limit rises proportionally. It is a precious asset when you buy a bigger house or want to buy an excellent car or enjoy an exotic holiday for your family. Research highlights the fact that 30% of your CIBIL score is dependent on your timely due payments.
It also helps the business personnel to expand their business and accelerate their economic mobility. A businessman who consistently appears on the top of the CIBIL list is highly valued and regarded by every financial institution.
- Higher loan approval limits: A high CIBIL score gives lower interest rates and increases the chances of getting higher loans. That is especially beneficial if you are starting a business.
- Hassle-free approval for rented properties: This is another significant benefit of a high CIBIL score that is often unnoticed. If you have a high credit score, your home/business/car loans will get quickly approved.
- The attractive credit card offers: Credit card users must be aware of this fact. An excellent CIBIL score can help you gain access to some of the exciting credit card offers. No matter which bank's credit card you possess, the benefits are the same.
Significance of CIBIL score
CIBIL score is of great importance in the Indian Financial System. Your financial planning is hugely dependent on this score. Smartly managed finances are of no use during financial emergencies. Under such circumstances, getting a loan is the only option you have, which is primarily determined by your CIBIL score. Your credit score has a powerful influence on the below-mentioned facets:
Interest rate offered
A good CIBIL score can rescue us from emergencies that require a considerable sum of money. So, we need to limit our spending. It will help us to reap the loan benefits in the future.