Credit score is the most frequently used term in the financial industry. Maintaining a high Credit score helps to get quick loan approval. Because a high score, typically over 700, represents that you are financially stable, have a regular source of income, and have a history of on-time repayments. All these factors play an important role in the decisioning of your loan application with SMFG India Credit.
What is Credit Score?
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.
Credit score is generated by credit bureaus, who are authorized 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 help the financial institutions to process loan applications made by individuals as well as businesses.
CIBIL score or credit score as it is generically known, is one of the important factors that we look into when prospective borrowers apply for loans. 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 score. A credit report is the 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 organizations 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?
Here are some of the ways in which you can check your CIBIL score for free:
1. Directly from the Bureau Website:
Most credit bureaus allow individuals 1 free credit score check. For instance, if you would like to know your CIBIL score, you can login to 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 credit score 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 Bank:
Some banks allow their customers to know their CIBIL score for free once a year through the logged in section of their websites (Netbanking) or mobile app. You can contact your bank or login to their netbanking / mobile banking applications to check if they provide this facility.
3. Third Party Apps
Certain apps allow registered users to view their credit score and credit report for free. For instance, if you are registered with a third party payment, credit or any fintech app, you can avail their free credit score check facility which are available in most cases.
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 database 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 report for individuals as well as businesses. The credit score or CIBIL score as it 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.
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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?
Credit Score is calculated based on various factors such as your credit history, any past rejection of loan applications, credit utilization 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 in the past 6 months
- Active loans and the total amount of loan balance
- Type of loans such as collateral-free loans or secured loans like home loan
- Delayed or missed monthly installments
- Multiple loan applications, inquiries and rejections
- Utilization of credit card
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 ratesto 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 affects 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 score a higher number.
- Keep an eye on your credit score - Regular monitoring of 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.
- 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 utilization is within the limit.
