Banks and Non-Banking Financial Companies (NBFCs) check their credit score or CIBIL score before providing various types of loans or advances to any person or institution. This is an advance step of measuring credit risk. Credit Information Bureau (India) Limited (CIBIL) is a Credit Information Company, which was incorporated in August 2000. It has been promoted by State Bank of India, Housing Development Finance Corporation Limited (HDFC), Dun & Bradstreet Information Services India Private Limited and TransUnion International Inc.
To know the CIBIL score of an individual, the borrower must first obtain a copy of his/her credit report from CIBIL. The credit report is an important document that provides information about the borrower's credit history. Once the borrower gets the credit report, he/she can find out his/her CIBIL score in it.
The report contains detailed information about the repayment history of loans and credit card payments made by an individual in the past. It also has in it details relating to any defaults made by the individual on payment of dues on time including penalty charges incurred due to non-payment, if any.
A lender will use this information to ascertain the default risk associated with a borrower while granting him/her loan and advances.
What is CIBIL?
What is Cibil Score?
How Is The Cibil Score Calculated?
- Number of loan/credit applications
- Track record of emi payments and credit card payments
- What type of current loan are there? What is the percentage of unsecured & secured loan?
- Credit utilization – that is, how much of the income is going into payment
- There is no payment default or recovery going on anywhere
- The combined score of all of these is calculated by computer isolation and provides a 3-digit score between 300 and 900. This is the 3-point score you consider cibil/credit score. The higher the score, the better your credit profile will be considered, and the lower the score, the more credit risk will be added to your profile.
How Much Cibil Score Is Considered Correct?
- 300 – 600
- 601 – 749
- 750 +
How to improve your CIBIL score?
- Don't take a loan without needing to, if borrowing from friends and relatives can make a point, then keep this option first.
- Do not apply for loans in too many banks at a time.
- Pay your loan and credit card payments ahead of time.
- Avoid any kind of default unknowingly.
- Don't become a co-applicant or guarantor in a loan with those who don't trust them.