The CIBIL score is one of the most significant factors that lets lenders determine the reliability and creditworthiness of the borrower and perform risk assessments based on their past credit behavior. The CIBIL score full form is Credit Information Bureau India Limited, a credit rating bureau in India that has access to clients’ credit details. But the question is: what exactly is a good CIBIL score, and how can you maintain it? In this post, you will walk through the importance of the CIBIL score, tips to improve the CIBIL score, and lots more things.
The Meaning and Importance of a Good CIBIL Score.
Every borrower applying for a loan must be aware of the CIBIL score meaning. It is a 3-digit numeric summary of a person’s credit history and ranges from 300 to 900 (the higher the score, the lower the risk). A CIBIL score is a score that the CIBIL bureau assigns to a borrower based on their profile.
A high CIBIL score comes with numerous benefits for the applicant including the following:
Reasonable interest rate: A person with a higher CIBIL or credit score becomes eligible to get a credit card, home loan, or personal loan at comparatively lower interest rates.
Faster approval for loans or credit cards: A good credit score may also help you with improved chances of a loan or credit card approval by showcasing a lower risk of default and your responsible credit behavior.
Access to premium credit cards: A credit score is one of the first things that lenders consider before approving a credit card application. Companies provide access to premium credit cards to applicants having good credit scores and meeting other requirements that consist of excellent rewards such as privileged services, cashback, etc.
Higher chances of accessing pre-approved loans: A good CIBIL score is also important to increase the possibilities of accessing credit card offers and pre-approved loans. It helps borrowers with faster access to credits due to minimal documentation and faster approval.
Quick approval for higher credit card and loan limits: Since a good score demonstrates a lower risk of default, it increases the chances of approval for higher limits on credit cards and loan amounts.
Approval for longer repayment tenure: A higher credit score can increase your chances of getting a longer repayment tenure on a loan. A longer tenure helps with smaller EMIs and a reduced credit burden each month, thereby providing easier management of monthly expenses.
What is a good CIBIL score range?
● Zero CIBIL score: A borrower with a 0 CIBIL score can also get loans from some lenders, but with strict terms and conditions and higher rates of interest.
● NA or NH: CIBIL score-1 or NA (not applicable) or NH (no history) indicates that you have never taken out a loan or used a credit card, showing the absence of a credit history. A CIBIL record of less than 6 months results in a zero credit score, indicating not sufficient credit history.
●300-549: A CIBIL score range of 300-549 is considered poor, resulting in decreasing chances of approval of loan and credit applications. You will fall into this category when you have a record of being defaulted on EMIs or credit card bills or making irregular repayments.
● 550-649: Late payments or inconsistency in past payments may show you as a risk by lenders with a fair CIBIL score between 550 and 649. This score may reduce the chances of loan applications and result in higher interest rates.
● 650-749: A CIBIL score between 650 and 749 is considered good and results in credit and loan applications. Lenders will consider you a defaulter for a loan.
● 750-799: You will get favorable loan terms if you have a good CIBIL score within this range. Make your payments regularly and maintain a longer credit history and responsible repayment behavior to earn a score within this range and receive faster loan approval.
● 800-900: You will have an excellent CIBIL score if it comes within a range of 800-900. This score reduces the risk of default and may provide you with amazing deals on credit cards and loans. You will require an outstanding credit history, financial management, and timely credit payments.
How do you check your CIBIL score?
➔ Visit the official website of the Credit Information Bureau India Limited.
➔ Click on ‘Get your CIBIL score’, log in with valid details, and choose a subscription plan.
➔ Make the required payment, verify your identity, and generate your CIBIL report immediately. You can check your score, financial status, credit summary, and more details.
How can you improve your CIBIL score?
If you have a poor or fair credit score and want to learn CIBIL score improvement tips to increase your chances of faster loan approval with favorable terms, then work on the following tips:
Timely pay your EMIs or credit card bills every single month.
Try to use 30% or less of your individual credit card limit.
Regularly review your credit reports once a year to identify the errors having a negative impact on your score and timely correct them.
Choose a secured card if you have a bad or poor credit score, as it shows your good payment behavior to the credit bureaus.
What factors can affect your CIBIL score?
The following are the most influencing factors affecting your CIBIL score:
Age or length of your credit history
Amount owed
Repayment history
Credit mix
Errors in your CIBIL report
Credit Inquiries
New credit
Multiple credit applications
Credit utilization ratio
Conclusion
A higher CIBIL score is important to show yourself as a risk-free borrower with responsible credit behavior. Maintaining an excellent CIBIL score can create a positive impression on the lender when evaluating your credit history and application. So, focus on improving your credit or CIBIL score to benefit from a lower interest rate, easier approval for a higher loan amount and longer repayment tenure, and accessing pre-approved loans and premium credit cards.
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