What is CIBIL Score & Report?

What is CIBIL Score?

CIBIL score is a three-digit numeric summary of credit history and the reflection of a person's credit profile. There are multiple agencies which calculate the credit scores of individuals as well as entities. The most commonly used credit score in India is the CIBIL score, which is calculated by the Credit Information Bureau of India Ltd. (CIBIL). 
  
The score ranges between 300 to 900, and a person closer to the score of 900 is considered to be more creditworthy. Such a candidate has a better chance of getting their loan application approved. These days, CIBIL scores are also sometimes used by employers as a part of background checking before hiring a candidate. 

What is the Meaning of CIBIL Score?

The CIBIL score plays a very crucial role in the loan approval process. Using the score, the lender categorizes the person on a risk scale of 1-5, with 5 being the lowest risk. This categorization then decides  the terms of the loan that can be provided.

Above 750: The score above 750 is considered to be an excellent score and the person and has the lowest risk rating. The loan approval process is also quick and hassle-free.

A higher credit score gives borrowers the ability to negotiate on the terms of the loan. For example, such borrowers can get the lowest possible interest rate on personal loans (as per the lender’s policy) as well as a longer tenure, higher loan amounts, etc.

Between 700-749: This score is considered to be a good score and the person has a good chance of securing the loan on favourable terms. However, the lender may choose to offer slightly higher rates of interest for such applicants.

Between 650-699: This score is considered as an average score and the lender may sanction the loan by asking for an additional guarantee like a guarantor or a co-applicant. 

Between 600-649: This score is considered to be bad and indicates constant defaults on loan repayment or credit card bills. The chances of getting a loan are slim.

Below 599: The score is considered to be poor and indicates poor credit health and the lender may refuse to advance a loan. Here are a few tips that you can follow to improve your CIBIL score. 

What is a CIBIL Report?

The CIBIL score is based on the details of the "Accounts" and "Enquiries" section of the CIBIL report. The CIBIL report is generated by the Credit Bureau of India Ltd. and contains the financial health summary of an individual (or entity). It contains the details of all the loans (including credit cards, overdrafts and any other such instruments) as well as the income from various sources. It catalogues any missed or delayed EMI payments, defaults as well as outstanding loan amounts pertaining to the individual (or entity).

Every time a person applies for a loan, the financial institution will carefully go through every detail of the credit report to determine the applicant’s credit worthiness and history.

Tips to Improve CIBIL Score

Following are the actions to be followed to improve the CIBIL Score over time:

• Pay all your EMI and credit card bills in full and on time
• Avoid revolving your credit card balances
• Avoid taking multiple loans
• Avoid applying with multiple lenders / credit cards at the same time.
• Avoid going for a loan settlement, instead, demonstrate the ability to repay the loan
• Limit the credit utilization ratio of your credit card up to 30%
• Check CIBIL score on a regular interval and dispute any inaccuracies on the credit report

Apply For Personal Loan   Check Free Credit Score