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 Know CIBIL Score for Free from the Official Website of TransUnion CIBIL Score?

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.

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.

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