Published on Mar 10, 2023Updated on Aug 24, 2023
Learning about CIBIL score is crucial not just for people who have a credit history, but also for people who have never applied for a credit card or a loan. Financial firms like banks and NBFCs use credit score information to decide loan acceptance or rejection. The higher your CIBIL score, the easier it is to get a loan. Today, there are numerous misconceptions concerning CIBIL. Some are definitely true, while others are completely false.
CIBIL score is a reflection of how healthy your financial systems are. It is a consolidation of your debt history, current debt, income-to-debt ratio, etc., to determine if your repayment capability is up to the mark if you take up a given loan today. An important fact to know about CIBIL score is that it can be the difference between loan approval and rejection.
TransUnion CIBIL uses the words "CIBIL Score" and "CIBIL Rank" interchangeably. The word "CIBIL score" is, nevertheless, applicable to individuals. The word “Credit Rating”, on the other hand, is applicable to enterprises. The "CIBIL Score" ranges from 300 to 900. The closer your CIBIL score is to 900, the more likely it is that you will be approved for a loan, if you fulfil the lender’s eligibility requirements. The CIBIL Rank scale ranges from 1 to 10. The closer a company's CIBIL Rank comes to 1, the better its chances of getting a loan from a lender are.
CIBIL, Equifax, Experian, and CRIF High Mark are some of the most well-known credit bureaus in India. Each bureau calculates credit scores differently based on parameters such as credit use, payment history, duration of credit history, and the type of credit accounts. Individuals should check their credit ratings from different bureaus to receive a complete picture of their credit standing.
Must Read: How to Check CIBIL Score for Personal Loan?
The CIBIL score does not take into account investment history or asset ownership, such as stocks, mutual funds, or real estate. As a result, an individual's investment portfolio has no effect on their CIBIL score and vice versa. Individuals must grasp the many sorts of financial information used to establish their creditworthiness and manage their credit and investments accordingly.
When a person asks for a personal loan or a credit card, the lender does a hard inquiry into their credit history, which is documented on their credit report. A high CIBIL score for personal loan applications in a short period of time can negatively impact an individual's overall credit score.
CIBIL does not keep track of defaulters. Instead, it collects information on a person's credit history, such as loan and credit card account data, payment history, and outstanding debt. When a person applies for a loan or a credit card, financial institutions and other lenders utilize CIBIL ratings and reports to determine his or her creditworthiness.
Credit utilisation is the amount of credit that a person is using in relation to their credit limit. Credit use, after credit history, is an important component of your credit score. Maintain a minimal outstanding debt, limit your credit usage, and pay your credit card amount on time. Even if you pay your bills on time every month, late payments can have a negative influence on your credit score.
Must Read: How to Increase CIBIL Score from 500 to 750?
Checking your credit score information has no effect on your credit score and will not lower it. In fact, monitoring your CIBIL score on a regular basis will help you keep track of your credit standing and detect any flaws or inaccuracies that may be hurting your score. Individuals should also be aware of and control other aspects that can affect their credit score, such as payment history and credit utilisation. Check your check free CIBIL score online
Since there is no record of how an individual has managed credit in the past, having no credit history can imply to lenders that an individual is a high credit risk. As a result, lenders may be less likely to approve loan or credit card applications or provide lower personal loan rates. Individuals can begin building a strong credit history by applying for a credit card or a small loan and making their monthly payments on time and in full.
Credit scores are just one of the many factors that financial institutions consider when evaluating loan applications. Each lender may have a different minimum credit score requirement for different types of loans. So, even if you have a lower CIBIL score, it does not necessarily mean that all loan opportunities are closed off to you. You may still be able to obtain a loan, albeit at a higher interest rate, from lenders such as non-banking financial companies (NBFCs). Don't let a low credit score discourage you from exploring all of your loan options.
Credit history duration, or the amount of time an individual has held credit accounts, is one of the parameters evaluated when establishing a credit score. The longer a person has credit accounts, the better it appears on their credit report and the higher their credit score is going to be. When a person closes an old credit account, they are shortening their credit history, which can have a negative influence on their credit score.
To sum up, the CIBIL score is a critical indicator that can have a substantial impact on a person's financial destiny. While many people are familiar with the fundamentals of CIBIL scores and how they are generated, there are a few lesser-known aspects to be aware of. Understanding the facts behind CIBIL ratings can help people make better credit decisions and improve their financial future.
If you wish to take up a personal loan after checking your credit information, then turn to SMFG India Credit. You can enjoy a 100% online application process with quick personal loan approval. With personal loan interest rates starting from 11.99%* per annum, you can borrow up to INR 25 lakhs* without collateral. Check your EMI obligations through our online personal loan EMI calculator and apply today!
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