If you are applying for a loan or credit card, you may have heard about CIBIL score. But what exactly is a CIBIL score, and why does it matter? CIBIL is a three-digit summed credit history score calculated by the Credit Information Bureau (India) Limited (CIBIL).
This score plays a vital role in determining your creditworthiness and loan eligibility and is used by lenders to assess your credit risk and decide whether to approve or deny your loan application. In this article, we will explore the importance and benefits of the CIBIL score, including how it is calculated and how you can maintain a good score.
What Is CIBIL Score?
CIBIL score is a composite of numbers that reflects your credit history. This score is calculated based on your credit history, including your credit card usage, loan repayment behaviour, and other factors.
CIBIL score is provided by the Credit Information Bureau (India) Limited (CIBIL) and ranges from 300 to 900. A higher score indicates better creditworthiness and a lower risk of default.
Why Is CIBIL Score Important?
CIBIL score plays a crucial role in determining your creditworthiness and loan eligibility. Lenders, such as banks and financial institutions, use this score to evaluate your credit risk and decide whether to approve or reject your loan application.
A high CIBIL score indicates a low risk of default, making it easier for you to get loans at competitive interest rates.
A good CIBIL score can help you negotiate better loan terms, interest rates, and loan eligibility. With a high score, you can also get pre-approved loan offers from lenders, saving you time and effort in the loan application process.
How is CIBIL Score Calculated?
CIBIL scores determine creditworthiness. Lenders use this three-digit credit history summary to assess your creditworthiness and loan eligibility. How is CIBIL calculated?
- The CIBIL report, which details your credit profile, determines your score. Your credit profile includes home loans, credit cards, personal loans, vehicle loans, overdraft facilities, and more over the past 36 months.
- Numerous things determine your CIBIL score. Credit utilisation, repayment history, credit inquiries, credit mix, and duration of credit history are these. Late payments, heavy credit utilisation, frequent queries, and a lack of credit diversification might lower your CIBIL score.
- Maintaining a solid credit profile and paying bills and credit card dues on time might boost your CIBIL score. It will help you get lower interest rates and better terms. To profit from a good CIBIL score, monitor your credit profile and credit score.
A CIBIL score is crucial to your financial health, determining your creditworthiness and loan eligibility. You can access loans at competitive interest rates and negotiate better loan terms by maintaining a good score. Remember to stay on top of your credit history, pay your bills on time, and avoid multiple loan applications at once to keep a healthy CIBIL score.