In the financial industry, the term credit score is one of the most frequently used terms. This score is a key indicator of your creditworthiness and significantly influences lenders' assessments of your repayment capacity. Therefore, maintaining a high credit score is crucial for increasing your chances of quick loan approvals.
Commonly known as the CIBIL score, this value is derived from data submitted by your previous lenders to the credit bureaus, with updates occurring typically every month. A high score, generally considered to be above 700, represents financial stability, a regular source of income, and a history of on-time repayments. All these factors play an important role in the decision of your loan application with SMFG India Credit.
What is Credit Score?
A credit score is a number representing the creditworthiness of an individual. This is one of the most basic parameters used by financial institutions including SMFG India Credit to evaluate the creditworthiness of a loan applicant.
A credit score is generated by credit bureaus, which are authorised by the RBI (Reserve Bank of India) as official credit rating agencies. TransUnion CIBIL Limited (previously known as - Credit Information Bureau India Limited), is one such trusted and leading credit agency in India. They are known for estimating accurate scores and helping financial institutions to process loan applications made by individuals as well as businesses.
Credit score or CIBIL score as it is generically known, is one of the important factors that we look into when prospective borrowers apply for loans. A good credit score represents the economic stability of an individual which in turn makes financial transactions easier.
However, at times, it may not be very easy to understand how to read and interpret your credit report properly. There is a vast difference between a CIBIL report and a score. A credit report is a detailed document of your credit history consisting of credit card transactions, the total number of loans, employment details, contact information, etc. On the other hand, the credit score is a three-digit number representing the summary of the credit report.
Credit reports are generated by organisations called credit bureaus. Lending institutions provide them with the data of borrowers based on PAN card numbers, which are then used by these organisations to generate credit scores and reports for each individual/entity.
How To Check Your CIBIL Score?
You can check your CIBIL score online to make informed financial decisions. Here are some of the ways through which you can conduct a free CIBIL score check:
1. Directly from the Bureau's Website
Most credit bureaus allow individuals 1 free credit score check. For instance, if you would like to know your CIBIL score, you can log into the CIBIL website and create a free account. Enter your details. A valid ID such as your PAN, Voter ID, Ration card, Passport etc. and the corresponding number is required. After successful account verification, you will be able to see your CIBIL score.
Next, based on this score, you can select a lender and apply for a loan. Please remember that most bureaus allow you to check your CIBIL score online only once through a free account. A paid account will enable you to check your credit score more times in a year.
2. From Your Existing Lending Firm
Some lending firms allow their customers to know their CIBIL score for free once a year through the logged-in section of their websites (Netbanking) or mobile apps. You can contact your lender or log into their net banking / mobile banking applications to check if they provide this facility. If they do, you can follow these general steps to check your credit score through their website:
- Enter your details
- Verify your information by entering the OTP you receive on your registered mobile number
- Access your credit score and report
3. Third-Party Apps
Certain apps allow registered users to view their credit scores and credit reports for free. For instance, if you are registered with a third-party payment, credit or any fintech app, you can avail of their free credit score check facility which is available in most cases.
Similar to the previous methods, you will need to enter your details and verify your information by entering an OTP.
Credit Bureaus in India
There are 4 credit bureaus in India – TransUnion CIBIL, Equifax, Experian and CRIF Highmark.
- CRIF High Mark - CRIF High Mark is a full-service credit information bureau that has a strong presence across MSME, commercial, retail as well as microfinance segments including agri and rural. It was founded in 2007 and has since then become one of the largest credit bureau databases in India. CRIF credit score ranges between 300 to 900.
- CIBIL (TransUnion Credit Information Bureau (India) Ltd.) - TransUnion CIBIL is one of the first credit information companies in India and is one of the four bureaus to provide detailed credit reports for individuals as well as businesses. The credit score or CIBIL score as it is popularly known, helps individuals assess their credit score for applying for loans or credit cards and helps companies identify any potential risks of an applicant. The CIBIL score ranges between 300 and 900.
- Experian - - Experian is a multinational credit reporting company that launched operations in India in 2010. Like most other bureaus, Experian also caters to individual consumers as well as businesses. The credit score for Experian ranges between 300 and 850.
- Equifax - Equifax India is a credit information company in India and is a joint venture between Equifax Inc. USA and seven leading financial institutions in India. It provides credit-related services to lenders, consumers and businesses.
Get a Personal Loan Upto Rs. 30 Lakhs
HASSLE FREE APPLICATION PROCESS | ATTRACTIVE INTEREST RATES
What are the requirements to check Your Credit Score?
PAN Number
Employment details
Personal Details
Apply for a loan or credit card
Credit Score Ranges
Most credit rating agencies have credit score range between 300 - 900. For example, CRIF as well as CIBIL following this range. 300 is the lowest and 900 is considered as the highest CIBIL Score.
Excellent
This helps to get the best possible offers on loans with lower interest rates.
Very Good
This is the ideal score.
Good
This can be improved quickly.
Fair
This is not a good score and should be improved.
Doubtful
This is not a good score and should be improved.
Bad
This is not a good score and should be improved.
How is Credit Score Calculated?
A credit score is calculated based on various factors such as your credit history, any past rejection of loan applications, credit utilisation and more. The credit score of an individual takes into account many factors, including the overall history of repaying debts, loan applications and credit card usage. There are a total of 200+ variables having different values which can be used as inputs. These inputs are entered into an algorithm which is designed specifically for credit score estimation.
Some of the main factors affecting the credit score are;
- History of Bill Payments: Lending firms assess the payment history of loan applicants, typically for the past 6 months, to understand their financial behaviour. Consistent on-time payments can positively impact your score.
- Active Loans: Applicants with multiple pending loans may find it challenging to qualify for a new one or may be subjected to higher interest rates.
- Type of Loans: Secured loans (like car loans) often come with lower credit score requirements compared to unsecured loans (like personal loans), as they are backed by collateral.
- Delayed or Missed Monthly Instalments: Multiple missed payments can negatively impact your credit score, which may, in turn, lead to the rejection of your loan application.
- Multiple Loan Applications: Several hard inquiries can temporarily lower your credit score, which is why it is recommended not to apply for multiple loans frequently.
- Utilisation of Credit Card: Low credit utilisation can signal to lenders that you manage your funds responsibly and can repay your debts on time. It is best to keep your credit utilisation ratio at or below 30%.
How to maintain a good CIBIL score or a Credit Score?
A good CIBIL score or a credit score helps you to get a loan easily at the best interest rates. For example, at SMFG India Credit, we offer competitive personal loan interest rates to applicants whose CIBIL score is more than 750.
On-time payments always help you to maintain a good CIBIL/credit score. Schedule your monthly bills on time or set up auto payments. Delayed or missed payments are not good as it does get reflected in your credit bureau report and affect the score. Similarly, applicants who have been prudent in using various lines of credit such as credit cards or personal loans will also find that their credit score is well above the acceptable range. Conversely, applicants with multiple ongoing loans will have a lower CIBIL or credit score.
How to improve your Credit Score?
If you don’t have a good CIBIL score or a credit score, there’s no need to worry. It can always be improved over a period of time by following a few simple tips. Being punctual and honest in every financial transaction is the ultimate key to scoring a higher number.
- Keep an Eye on Your Credit Score - Regular monitoring of your credit score helps you get a clear picture of where you exactly stand and how much improvement is required.
- Analyse the Credit Bureau Report - Your credit report consists of a detailed analysis of your whole credit history. This helps you to know the errors which need to be corrected to achieve a higher score. It takes time to affect the score but credit score can be improved by regularly working on the errors and keeping an eye on each CIBIL score update.
- Keep Your Loan Applications/Rejections to a Minimum - Applying for too many loans and getting rejected decreases your credit score. Before going for any loan application make sure that you have checked the eligibility criteria.
- Credit Card Usage Limit - Make sure your credit card utilisation is within the limit.
- Repay Loans on Time: Repaying your EMIs and credit card dues on time can help you avoid penalties and gradually improve your credit score. You can set reminders or standing instructions to your account to prevent missed payments.
- Don’t Close Old Credit Card Accounts: Lending firms value a long age of credit history, which is why you should not consider closing your old credit card accounts. Maintaining these accounts, even with a zero balance, can positively impact your credit score.
- Maintain a Healthy Credit Mix: Balancing a healthy credit mix, which includes both unsecured credit (like personal loans) and secured options (like home loans), can enhance your credit score. A diverse mix of credit demonstrates your ability to manage different types of loans responsibly, which can strengthen your overall application.
What Are the Factors That Are Considered for Calculating a Credit Score?
Let us briefly revise the various factors that reflect your financial habits and history, ultimately affecting the calculation of your credit score:
- Recent credit or repayment activity
- Length of credit history
- Number of credit inquiries in a specific timeframe
- Mix of different credit types
- Total amount of existing debt
- Amount of credit utilisation against the available limit
Impact of CIBIL Score on Your Loan & Credit Card Eligibility
A CIBIL score report significantly affects an applicant’s loan and credit card eligibility, as it reflects their ability to repay borrowed amounts. A poor credit score may lead to:
- Rejected Loan Applications: Lending firms often reject loan applications with low credit scores, viewing them as more likely to miss payments.
- Higher Interest Rates: Lenders who approve applications with low credit usually compensate by charging higher interest rates to account for the increased likelihood of delayed/non-payment.
- Stricter Terms for Credit Card Eligibility: Applicants with low credit scores generally receive lower credit limits or less favourable terms as compared to those with a higher score.
