CIBIL Score

CIBIL is the short form of the Credit Information Bureau (India) Limited is a premier agency to provide CIBIL score and reports of the individuals. The agency was established in the year 2000 and is currently known as TransUnion CIBIL Limited. The main motive of this agency is to maintain the records of all the credit-related activities of companies and individuals. These records (such as credit card history and loans) are given by the financial institutions and banks periodically. As per the data, the CIBIL agency generates CIBIL reports and scores.

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What is the CIBIL Score?

A CIBIL or credit score is basically 3 digits numeric summary of whole credit history of an individual. The range of this score is 300 to 900, where 300 is the lowest and 900 is the highest. As mentioned above, this score is issued by the TransUnion CIBIL agency after considering the data of the credit report.

As per the scoring system of the TransUnion CIBIL agency, the higher the credit score, the good is the credit history and hence the individual has responsible repayment behavior. Most of the banks and financial lenders favor and trust the credit score more than 750 and one who is having credit score 750 or more easily gets the loan.

Importance of Checking CIBIL Score

As mentioned above, CIBIL score meaning gives the first impression to the financial lender about your loan repayment behavior. This is the reason it is suggested to check your credit score. The areas where the score of CIBIL matters the most are:

  • Interest Rate: Most of the banks and financial institutions offer a lower interest rate to individuals with a higher credit score.
  • Credit Approval: People with good credit score tend to get credit cards and loans more easily than those with bad or low credit score. Those having credit score more than 750 have more chances of easy approval of loans on their applications.
  • Types of Credit Cards: Those who have good credit score get a wider range of offers on credit cards as well as different types of credit cards from various financial institutions and banks. On the other hand, this facility is not offered to those who have a poor score.

How to Get Credit Score for Free from Policybazaar.com?

Steps to get credit score for free from PB.com website:

  • Step 1: In the first step one has to select his/her ‘Gender’ from the given selection box.
  • Step 2: Then the applicant has to provide his/her ‘Full Name’.
  • Step 3: In step ‘3’, one has to provide his/her ‘Date of Birth’.
  • Step 4: After providing these details, one has to provide the ‘Pin Code’ and click ‘Next’.
  • Step 5: In this step, one has to provide his/her PAN.
  • Step 6: In the last step, the applicant has to provide his/her ‘Email Id' and tick the checkbox to receive his/her credit information from the bureau and other conditions.
  • Step 7: Click ‘Generate Free Credit Score’ button.

How to Know CIBIL Score for Free from the Official Website (CIBIL[dot]com)?

According to the guidelines of the Reserve Bank of India, all companies that provide credit information in India, such as TransUnion CIBIL Ltd, can provide one free report of credit upon the request of the individual in each calendar year. This report contains a credit score and other things. Mentioned below are the steps to get free CIBIL score online for free:

  • Go to the official website of the TransUnion CIBIL Score and click the link that is there for providing a free credit report.
  • For creating the CIBIL account, one has to provide his/her details like name, phone number, email address, etc.
  • For identity verification, one then has to provide fill the form with the following details – gender, date of birth, identity proof number (Aadhaar, PAN, etc.), and postal address.
  • Accept the conditions and terms once you have completed the form. The website now will provide the credit score in credit information report.

So, if someone wants the answer of how to check my CIBIL score for free or who wants to get a free CIBIL score, then he/she can follow the above steps.

Calculation of CIBIL Score

Every company that calculates the CIBIL or credit score follows a different formula, however, the TransUnion CIBIL calculates this score as per the information that is present in the “Enquiry” and “Accounts” section of the credit report. Here this agency takes the following factors into consideration:

  • History of Repayment: The percentage of this factor that affects the credit score of an individual is 30%. This is not the small percentage instead of improving it can significantly improve the creditworthiness of an individual. So, if one has always ensured timely repayments, then it reflects a positive effect on his/her credit score.
  • The rate of Credit Utilization: This percentage by which this factor affects the calculation of the credit score is 20%. This is basically the balance owned in the credit card of an individual while comparing it to its credit limit. A high rate of credit utilization is not as good as it shows an increase in the burden of debt. In this way, if the rate of credit utilization goes down, it reflects the reduced repayment burden which improves the credit score.
  • Credit Exposure: The percentage by which this factor affects the credit score is 25%. This is basically the number of applications that one sends to different banks or financial institutions for loan approval. This is not a wise decision as so many applications bring down the credit score.
  • Credit Duration and Mix: The percentage by which this factor affects the credit score is 25%. The credit score improves when one maintains a healthy balance between unsecured credit and secured credit.

What Does the Range of CIBIL Score Mean?

The CIBIL or credit score ranges from 300 to 900, where 300 is the lowest and 900 is the highest. Mentioned below is the breakdown of various credit scores:

CIBIL Score Meaning
-1 or 0 -1 Credit Score means that there is no information available about the credit history of the applicant. Mostly this score is referred to as “NH”. 0 credit score means that an applicant's credit history is available for less than six months and therefore it is not sufficient to provide any score between 300 and 900.
300 to 550 The credit score within this range is not considered good. The chances of approval of loan applications or credit card are very less. The reason for the same is people who have scored in this range are considered as applicants with high risk.
550 to 650 This is a decent credit score range. Applicants coming under this range reflect good behavior towards loan repayments. However, the chances of application rejection are high even in this case also. If the lenders accept the applications of such applicants then the interest rates can be high.
650 to 750 This is a good credit score wherein the chances of getting approvals of loans are higher. However, the risk element is still there with these applicants so they may not get many benefits.
750 to 900 This is an excellent range to get approvals for loans and credit cards as per the guidelines of the Reserve Bank of India.

 What is Credit Report?

A credit report is a report of how an individual manages his/her finances. It basically provides the detailed breakdown of one’s credit history wherein it is mentioned when and how one pays bills, how much debt he/she has, and for how long he/she is managing his/her credit account.

The credit report is generated by credit bureaus that collect financial data of an individual from different financial institutions such as credit card companies, lenders, banks, etc with which he/she is associated with. The lenders use the information mentioned in the credit report to if a person is worthy to loan money. With this report, only the lenders decide the interest on a loan to offer to a person. In addition to this, with the credit report, the lenders determine whether a person will be able to meet the conditions and terms of his/her credit account. The following information is included in most of the credit reports:

Personal Information:

  • Name of the person
  • Former and current address
  • Social Security Number
  • Date of birth
  • Phone number(s).

Inquiries

  • The inquiries made by various companies for accessing an individual’s credit report.

Credit Information:

  • The historical and current credit accounts of a person
  • His/her account balance
  • The credit amount or limit
  • History of account payment
  • Creditor’s name
  • The date when the account was closed or opened

Public Records:

  • Bankruptcies
  • Liens
  • Civil suits and their judgments
  • Foreclosures

Credit Score Computing Agencies

Credit score computing agencies or credit information bureaus are special financial organizations that gather and maintain loan and credit-related information of individuals and commercial organizations. As per the financial records, these agencies generate credit score and report. There are four top credit information bureaus or credit score computing agencies in India:

  • TransUnion CIBIL: TransUnion CIBIL is more commonly known as CIBIL in India. This company was formally called as Credit Information Bureau (India) Limited. This company was founded in the year 2000. It is the first credit bureau of India that has a wide and strong member base of 950 and more entities. In this list, there are private and public sector banks included, non-banking financial institutions involved, home-finance companies, and various other financial institutions included. The company has credit information of approximately 700 million trades in three divisions, which are – Commercial Bureau, Micro Finance Institution Bureau, and Consumer Bureau. By using the credit information that is collected from all three bureaus, the TransUnion CIBIL Company generates its CIBIL report or credit report. The credit score issued by this company is known as CIBIL score.
  • Experian: This credit information company of India is one of the finest commercial financial institutions that is operated and undertaken collaboratively with a number of organizations including Union Bank of India, GUS Holdings BV (Netherlands), Federal Bank Limited, Axis Bank Limited, Punjab National Bank Limited, Indian Bank, VIC Enterprises, Magna Fincorp Limited, and Sundaram Finance Limited. This is the first financial institution that has received a license from the new Credit Information Companies (Regulation) Act (CICRA) 2005 in the year 2010. Experian is one of those companies that has established itself as ‘World’s Most Innovative Companies’ in a very short span of time as per the Forbes magazine’s 2014 edition. The company is known for offering both detailed and comprehensive credit report. The credit score of Experian ranges from 330 to 830.
  • Equifax: This Company was founded in the year, 1899 in Atlanta, United States of America. It was the year 2010 when this credit information bureau registered itself in the list of Credit Information Company in India by the RBI (Reserve Bank of India). It is one of the biggest credit information bureaus of the United States. Same as other credit information bureaus, Equifax also keeps the financial information of small, medium, and big organizations as well as individuals. With the option to get a detailed credit report, the Equifax Company helps an individual and organization to get relevant information related to finances.
  • Highmark: High Mark Credit Information Services or Highmark is also one of the most popular credit information bureaus of India that is known for maintaining the financial records of both organizations and individuals. This company was founded in the year 2005 and is based out in Mumbai. With generation and maintenance of credit information, this company is also known for providing credit score and reports to both organizations and individuals. Highmark also helps the concerned financial institutions and lenders to check the creditworthiness of an organization or an individual before approving loan or credit application.

Advantages of Having Good CIBIL Score

Maintaining a healthy and good CIBIL score gives one a lot of advantages especially in long run. Some of the advantages of the same are:

  • Fast processing of the application for a credit card.
  • The credit cards are provided at lower interest rates.
  • One with good credit score can easily negotiate on the interest rates of loans.
  • The credit cards can be provided with higher limits.
  • One can get houses and rented houses without much hassle

Tips to Improve CIBIL Score

By now it must be clear to everybody that how necessary it is to maintain a good credit score and in order to do so, one must follow the below tips:

  • Make Payments On Time: The first and the foremost thing to get a high credit score is making the repayments of the loans on time. In addition to this, making the payments of the credit cards on or before the due date also builds a good credit score. Any payment shown as missed or pending on the credit report leaves a negative impact.
  • Keep Inquiries for Credit as Low as Possible: Every time an individual makes a request for credit card or loan from the bank or other financial institution, then some hard inquiries are made on the CIBIL report and hence can bring down the credit report. Moreover, the lenders or financial institutions may think one has a credit hungry customer in such a case.
  • Improve Credit Limit: The credit limit is the total amount of money that one can borrow from his/her credit card. An individual can ask his/her credit card insurer to improve his/her credit limit, however, it is to be remembered here to not to exhaust this limit. One is suggested to not to exhaust more than 50% of the credit card limit till his/her credit score reaches to 750.

Required Credit Score for Various Loans

The credit score plays an important role when talking about the process of loan approval. Most of the leading financial institutions want to know the credit score of the loan seeker before approving or rejecting the loan application. The required credit score for taking various loans is mentioned below:

  • Required Credit Score for Home Loan: An individual with CIBIL score 700 and more can get the home loan very easily. The banks consider this score good for home loan approval.
  • Required Credit Score for Personal Loan: Maintaining the best credit score is the utmost requirement for personal loan approval from the banks. Since personal loans do not carry any collateral, thus they are the riskiest when we see them from the bank's perspective.
  • Required Credit Score for Car Loan: A CIBIL score of 600 is good enough to get approval for a car loan from financial institutions or banks. However, having a CIBIL score of 750 and above is better for the same.
  • Required Credit Score for Credit Card: The applications for a credit card are approved for individuals with CIBIL score 750 and more.
  • Required Credit Score for Bike Loan: Individuals having CIBIL score 650 and more can easily get bike loan.

The good the credit score is, the more are the chances of any kind of loan approval.

Things That Can Decrease the CIBIL Score

Mentioned below are some of the mistakes that people do unknowingly and that affect their credit score:

  • Dependency on Unsecured Credit: The CIBIL scores starts getting negative ratings as soon as one starts relying more on the unsecured form of credit such as personal loans and credit cards. It is recommended to maintain a balance between an unsecured and secured form of credits.
  • Making Many Enquires for Loans or Credit Cards: In order to get the best deals, customers tend to make many inquiries for the same. However, it should be avoided as for every inquiry hard inquiries are made and these can impact the credit score.
  • Delaying the Payments of the Credit Cards: Delay in credit card payments must be avoided as even a single delay in the payment can leave a negative impact on credit score. However, most of the times, people forget to make payments on time, but to avoid this it is suggested to set reminders for the same.
  • Having Several Credit Cards: Even though having more than one credit card gives financial independence and improves purchasing power, but this habit leaves a negative remark on the credit score. Moreover, chasing every card is not only difficult but can stain the income also. Therefore, rather than having multiple credit cards, it is suggested to have one credit card only and manage and maintain it properly to increase the credit score.

Difference between Credit Score, Credit Report, and Credit Rating

Credit Report: Credit report is reporting that contains the details of an individual’s financial history. This report basically keeps the records of a person’s debt accounts, the inquiries that have been made for new credits and the current balance in one’s account. This report basically contains the credit card repayments details made by an individual, repayments of different loans like student loans, automotive loans, or home loans. In addition to this, the credit report also contains the status of these loans like whether it is settled, doubtful, etc. In other words, a credit report tells how well a person is with his/her financial agreements’ payments with different previous as well as current lenders.

With all the information related to an individual’s debt history, credit reports also contain personal information like name, address, phone number, and PAN number of a person. The credit report is generated by a credit information bureau. The credit bureau gets then formation related to credit from different financial institutions such as banks, credit card companies, etc.  

Credit Score: A credit score is a three digit numeric value that is generated according to an individual’s credit history that is given in the credit report. Basically, a credit score provides the creditworthiness of an individual. This means, how likely one is for repaying the loans and making all the payments on time. Different credit reporting bureaus calculate the credit scores in different ways, however, all use some strong mathematical model to take care of the factors such as amount owned, payment history, length of the credit history, types of credit, new credit, etc. In order to provide the accurate financial status of an individual, the credit score changes with time.

Credit Rating: A credit rating provides the creditworthiness of an organization or a person for fulfilling the financial commitments as per his/her previous dealings.

A comparative analysis of credit report and credit score is as follows:

 

Credit Score

Credit Report

Definition

It is a numeric summary of personal financial measures and credit risk as per the information is given in the credit report.

It is a summary of a person's credit history that works like a credit reference.

Who does provide information?

The banks may sometime generate their own credit score or may refer to the credit scores given by companies like FICO or VantageScore.

Different credit reporting bureaus such as Experian, TransUnion, or Equifax.

How is this helpful in providing the creditworthiness?

The credit scores provided by FICO are majorly used. This score (by FICO) mainly depends on 5 factors. These factors that are taken into consideration are – payment history, amount owned by an individual, length of the credit history, new credit, and mix of credit. Here, the scores that are above 760 are considered as good and those who have this score are considered creditworthy.

A credit report is something that contains most of the information related to the financial data of an individual. This precisely contains information related to a person’s bank account, which includes the current account as well as past account. Apart from this, the information related to third-party collections and debts is also included. This includes information related to the loan amount, credit balance, payment history, etc.  

Types

After the implementation of FICO 9, there will be approximately 65 FICO scores. There exist various bank property scores and VantageScore provides three generations of the scores (credit).

Basically, there is main three credit information bureaus exist and each maintains a credit report. Since the creditors and lenders are not liable to provide information related to the credit history of an individual, thus the reports generated by these three bureaus may vary slightly.

From where a customer can procure these reports?

Different credit information bureaus and FICO give such information. Sometimes the lenders as well provide such information.

An individual can get his/her credit report from any of the information bureaus mentioned above.

Does it exist independently?

The credit score is given solely as per the information provided in the credit report.

This document is a standalone document.

From where can it be produced?

Various credit bureau companies including FICO give this information and many times even the lenders provide this information.

The customers can buy a credit report from any of the credit information bureaus.

 

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