Knowledge of credit scores is imperative for individuals planning to avail of loans in India. The 3-digit numerical expression on a scale of 300 to 900 speaks of an individual’s credit history and creditworthiness. Generated by TransUnion CIBIL, this score depends on your existing loans, previous debts, repayment history and several other factors.
You can now perform a free CIBIL score check online and improve it before applying for any credit.
5 essential things to know about CIBIL score
- Importance of the score
CIBIL score creates the first impression for a loan provider. It shows how reliable an applicant is, how he has handled repayment previously and decides whether to approve him a loan or not.
A high credit score helps you avail of lower interest rates, repayment flexibility, nominal associated charges and more. It also gives you the power to negotiate for better deals. Hence, ensure to conduct a free CIBIL score check and improve it if it is low before applying for any loan or credit card.
- Factors that affect credit score
Several factors are there which can influence the determination of your credit score. Some of these include:
- Minimum due amount: Avoid paying the minimum due amount on your credit card bill constantly. It reflects poor repayment habits, increases debts and creates a negative impression before lenders.
- Credit utilisation ratio: Having a credit utilisation ratio of over 50% sends a red flag to your lender. It represents you as a credit-hungry individual.
- Payment history: Be responsible for making repayments and bill payments. Avoid missing due dates or defaulting on payments.
- Errors in your CIBIL report: Any error, discrepancy, defaults, etc., in the credit report directly impacts your credit score. Hence, periodic reviews of this statement can aid you in resolving them and improving your credit score.
- Credit history: Your credit history reflects your behaviour as a borrower. Thus, try to build your credit history from an early stage of life to have a strong profile when you want to avail of loans.
- Repeated credit enquiries can hurt the CIBIL score
You can conduct a free CIBIL score check numerous times from CIBIL’s website or any authorised third party easily. These are soft enquiries that don’t affect the score much. However, hard enquiries conducted by lenders before giving loan approvals can hurt your CIBIL score. Once you apply for credit, the lender asks for a credit report from credit rating agencies like CIBIL, and such enquiries are regarded as hard ones. Hence, avoid applying for multiple credits at a time.
TransUnion CIBIL authorises NBFCs like Bajaj Finserv to offer CIBIL free checks on their portal online. It involves 3 simple steps where you need to enter personal details, verify your identity and finally, view the report and score. If your CIBIL score is high, you can immediately apply for any loan type after fulfilling other eligibility parameters.
Individuals can quickly check their CIBIL score for free and take a decision accordingly.
- Improving the CIBIL score is easy
There are many ways to pull up your CIBIL score, such as:
- Pay your EMIs, bills and dues on time
- Follow a proper repayment plan when borrowing credit
- Try to pay the full outstanding of your credit card within the due date
- Consolidate smaller debts to make them more manageable
- Maintain a healthy credit mix with both secured and unsecured loans
- Loans are also available with a poor CIBIL score
Indeed CIBIL score is an important eligibility criterion for every loan. However, a poor credit rating doesn’t always result in the rejection of loan applications. Leading NBFCs often sanction loans with a score below 750, but that may incur a higher interest rate. Moreover, the applicant may have to follow stringent terms and conditions. At times, lenders ask for collateral against the fund to ensure repayment.
Besides a free CIBIL score check, reading your credit report regularly is important, especially for errors and inconsistencies. Raise a complaint immediately, if need be, to correct it on time to avail of the financial benefits it entails. Simultaneously, while applying for new credit, check your lender’s eligibility requirement and apply where chances of approval are higher.