Finance

Everything You Need To Know About The CIBIL Score

Banks look at a range of information regarding a loan applicant’s financial history to establish his or her creditworthiness. Credit bureaus provide this information, which is referred to as a borrowers’ credit or CIBIL score by banks. In India, this rating is more generally referred to as a credit score.

In India, credit bureaus assign borrowers credit ratings ranging from 300 to 900 points based on their credit and repayment histories. Banks are willing to lend to borrowers with credit ratings of 700 and higher points. Borrowers with bad credit will have to pay a higher interest rate. Even though the terms CIBIL score and credit score are often used interchangeably, it is important to remember that CIBIL is one of India’s credit bureau organizations.

The CIBIL Score gives details about previous loans. As a result, having a strong CIBIL score is required to obtain bank loans and credit cards. Regular loan repayments help to maintain a decent credit score. It is simple to obtain a loan if the score is 750 or higher. The higher the CIBIL score, the easier it is to obtain a loan. The CIBIL score is based on 24-month credit history.  

Table of Contents

What exactly is a CIBIL score?

In India, credit bureaus provide borrowers credit ratings ranging from 300 to 900 based on their banking and payment histories. Banks are willing to lend to borrowers with credit ratings of 700 and above. Borrowers with weak credit will have to pay a higher interest rate. Even though the terms CIBIL score and credit score are sometimes used interchangeably, it is important to remember that CIBIL Score Login is one of India’s credit bureau businesses.

Scores depend on the customer’s creditworthiness

Credit bureaus assign the following scores based on the user’s credit history:

700 or more point CIBIL score

This score suggests that the lender is willing to offer you the best possible interest rate on a loan. 79 percent of loans are authorized for people with a credit score of at least 750.

600 and 700 points CIBIL score

Financial Institute will also be willing to lend to borrowers who have a CIBIL score of 600 to 700, which is considered a low-risk zone. You may, however, be charged a higher interest rate than folks with a better credit score.

300-600 points CIBIL score

Individuals with a CIBIL score of 300-600 are considered to be at high risk. Banks are cautious of lending to people in this scenario.

1–5 points CIBIL score

Borrowers who have had credit for less than six months are assigned a CIBIL score of 1–5.

-1 credit score

People who have never had credit are given a -1 credit score. This rating is given to first-time borrowers who have never taken out a loan or used credit before.

The most important elements influencing a credit score

Credit bureaus employ four primary elements to determine credit score ratings. The number of credit inquiries, repayment history, existing loan and credit utilization, type of loan and length, and repayment history is all aspects to examine. When determining a credit score, the most weight is always given to payback history, existing debts, and credit usage.

The cost of obtaining a CIBIL score or credit report

According to Reserve Bank of India (RBI) standards, credit bureaus may charge a small fee. To receive a credit report and a credit score check, the borrower will always be needed to make a payment. Borrowers must pay Rs 550 for a basic credit report and Rs 800 for a standard credit report to receive two credit reports each year. If the borrower wants more than one free credit score and credit report in a year, TransUnion CIBIL will charge a fee.

Follow these procedures to check your credit score:

  • To verify your CIBIL score and receive it in the mail, go to the CIBIL website, www.cibil.com.
  • Subscriptions are available in three levels: basic, standard, and premium.
  • Enter information such as your name, email address, and proof of identity to establish an account.
  • Make a payment by your subscription type.

Where can I receive a free credit report?

CIBIL reports are also available for free from many financial institutions, especially fintech start-ups. To provide you with a basic credit report, they will need a few details from you. You’ll be prompted to fill out a form for a free credit report, which will ask for personal information.

How long does it take to receive a CIBIL report?

Your CIBIL report and score will be emailed to you within five business days if you apply online. After confirming your paperwork, CIBIL will take a week to process your credit report request if you apply for one over the phone.

A loan’s credit score

Almost all Indian financial institutions give special interest rates to people who have a credit score of over 750. This means that if a bank offers a loan with a 6 percent interest rate, it will only grant it to those who have a credit score of at least 750. Lower credit score borrowers will pay a higher interest rate.

False assumptions that negatively impact on credit score

Here are some prevalent, but incorrect, misconceptions about credit scores and how they affect your ability to borrow money for a loan.

Not requesting credit

Banks will have to perform a more extensive examination to verify your creditworthiness and repayment capability if you don’t have a credit history. As a consequence, they will be extra careful while reviewing your loan application. Staying away from credit is advantageous, especially if you don’t use it for any of your financial needs.

Credit scores rapidly improve.

If you don’t have any credit history, you might be tempted to apply for credit cards and small loans to build one. This is a poor idea since credit institutions will notice that you are attempting to build a credit history rapidly. As a result, your credit score would decrease.

It’s a good idea to overuse credit.

When a credit card’s credit limit is surpassed, the credit usage ratio increases (the ratio of credit card balance to credit limit). If the ratio is as low as feasible, that is ideal. If you decide to raise your repayment obligations, your credit score may suffer.

Being a guarantor is advantageous

You may have offered to be a guarantor on a loan application for a friend or family, but this might damage your credit in two ways: if the friend fails on his loan, or if you are financially required to meet the guarantee’s requirements.

My credit history has been modified

The bank that gave the funding will produce a credit report for you when you return a loan. Your credit score would be affected by changes in your credit balance over time rather than rapidly. Because it might take up to 60 days for the credit bureaus to obtain this information, your credit score may change over time.

Postpone the payment

Credit bureaus assign you a credit score based on your capacity to repay your obligations. Even if you finally return the loan, late credit card payments and EMI defaults will persuade them that you lack financial control. In actuality, ratings are based on several criteria, and if the bureau discovers that your source of income has been compromised, your rating will be adjusted.

Old accounts are being closed

Because credit cards are considered unsecured loans, some of you may be racing to terminate an old account. Your credit score may suffer as a result of this. An old credit card account with a good payment history might help you expand your borrowing options.

Improve Your CIBIL Score With These Habits

Follow these strategies to raise your CIBIL score to enhance creditworthiness.

Maintain consistency and punctuality in your EMI payments

Try to be as regular and on time with your EMI and credit card payments as possible. This shows both a financial condition and appropriate behavior.

Maintain a healthy balance of secured and unsecured loans

Maintaining a balance of secured and unsecured loans will assist you in improving the borrower’s image. Individuals who often use unsecured loans may attract unwanted attention.

Maintain a low credit

Having a lower debt-to-income ratio is strongly advised. Though your loan repayments will lower the amount of your loan over time, it is also vital to keep a check on your credit card. Exercising your credit card limit too frequently may reflect negatively on your credibility.

Maintain Your Calm While Filling Out a New Credit Application

Try not to go overboard while applying for new credit. A little loan amount shows that you understand your ability to repay and will be able to return the loan on time. This method will assist you in improving your CIBIL score.

Examine your credit history

In the long term, monitoring your credit history regularly might be advantageous. Check to see whether your credit report accurately represents your current financial situation.

The explanation for Loan Rejection Despite a Good CIBIL Score

The following is a list of probable causes for reluctance in your credit approval procedure. Consider all of the reasons carefully and be sure to address them before applying for a loan.

Excessive credit borrowing

The bank always questions borrowers’ reliance on credit. They will consider the borrower to be a high-risk candidate. Furthermore, they will refrain from providing a fresh credit amount. Banks believe that debtors want to be overburdened with new credit.

The certain Comments on the Credit Report

Any criticism of the report indicates the applicant’s inattention to detail or bad repayment practices. As a result, it is strongly suggested not to ignore the remarks in a Cibil report, because banks use the applicant’s credit record before granting credit.

Instability in present employment or salary

If a borrower’s pay or position is unstable, or if the organization for which he or she works is on the bank’s blacklist. Aside from that, whether your address or employment regularly changes. It will harm your credit report.

The data that leads to the defaulter’s information

Even if you have a high CIBIL score, your prospects of being approved for a loan remain low. if the defaulter’s fundamental credentials, such as date of birth, personal information, age, gender, jobs, and other essential facts, match the defaulter’s details.

History of Tax Payments

Even if he has a decent CIBIL score, a person who has not submitted his income tax returns on time in the past two years is more likely to have his loan application refused.

Rejection of Previous Loans

When a new credit card application is made, the lender receives a credit report to check the applicant’s credit history. If it has a track record of loan denials, your new credit application request may be denied as well. Apply for a new loan once you’ve paid off all of your prior bills.

Several Serious Inquiries

When a lender checks your credit report to verify your credit history, this is referred to as a hard inquiry. If lenders ask you a lot of hard questions, it means you’ve asked for a loan several times, which leads to a credit application denial.

Failure to disclose accurate financial data

Failure to submit comprehensive financial information is another cause for a credit application denial. Even if you have a high credit score, lenders will always look at your financial summary to see if there are any flaws. Even if the applicant has a high CIBIL score, there is a substantial risk that your credit application will be rejected.

Lack to confirm specifics

If the banking institution is unable to verify your information, such as income, residence, and job proof, the loan will be denied.

The Candidate’s Age

If the borrower is above the age of 60 or nearing retirement, the loan application may be refused. Because of the prospect of 0% creditworthiness, financial organizations are hesitant to extend loans to such persons.

A high CIBIL score has several benefits.

A constant high CIBIL score will help you save money and simplify your financial life. Here are just a handful of the numerous benefits of having a good credit score.

Low-interest financing and credit cards are available

If you have a strong credit score, you will almost always be able to receive the best interest rates and pay reduced finance charges on credit card balances and loans. If you pay less interest, you will be able to pay off your debt faster and have more money for other things.

Easy Loan and credit card approvals

Your chances of getting credit are increased when you have a good credit score. In all, you can confidently apply for a loan or a credit card.

Increasing the bargaining power

If you have an excellent credit score, you will get a lower interest rate on credit cards and loans. If you need extra bargaining leverage, you might use other businesses’ enticing offers based on your credit score.

Obtain clearance for increased limits

A salary and a CIBIL score are required to borrow money. One advantage of having a strong credit score is that banks are more willing to let you borrow more money because you’ve demonstrated your ability to return your bills on time. You may still be authorized for some loans with a low CIBIL score, but the amount will be limited.

CIBIL report errors and their remedies

Account or Personal Information Variations

Type mistakes include a typographical error in an address, an incorrect birth date, or a spelling mistake in a name. Among the solutions are:

  • Go to the CIBIL website to obtain a copy of your credit report.
  • Check your account and personal information for any mistakes.
  • Fill out a form for online dispute settlement.
  • The credit agency will remove the inconsistency from the report after it has been confirmed.

DPD OR DAYS PAST DUE

If DPD displays anything besides ‘XXX’ or ‘000,’ payment is past due. If you paid the payment but DPD still displays an amount larger than ‘000,’ the lender or credit bureau made a mistake. Among the solutions are:

  • Determine which of the DPDs on the credit report is incorrect.
  • Fill out an online dispute resolution form to bring it to the attention of the credit bureau.
  • If the claim is genuine, the bureau will make the necessary modifications to the report.

THE ACCOUNT WAS CLOSED, BUT IT STILL SHOWED AS OPEN

  • Even if you have paid off your credit card, it will appear on your credit report. Most likely, the lender did not notify TransUnion CIBIL. Among the solutions are:
  • Locate the account that has been closed on your credit report.
  • Check with the lender to see whether the account has been closed and reported to a credit bureau.
  • Provide them with the relevant information and request a No Objection Certificate if the account has not yet been terminated.
  • When the bureau gets updated data, it will be removed from the report.

ACCOUNT TAGGING IS INCORRECT

There might be an issue with account ownership, causing you to see an account in the report that you do not own. These might be the consequence of clerical mistakes or illegal identity usage. Among the solutions are:

  • Completing the online dispute resolution form
  • Allow the bureau a few days to investigate and resolve the problem

When to Check Credit Score

If your credit score is low and you have filed an application before or without confirming it, you should check it. The loan, credit card, or other application may be rejected by the lender. A regular credit score check may, however, be necessary at other times as well. The following are examples of when a borrower should verify their CIBIL score.

When you apply for a loan or a credit card

If your credit score is low and you have filed an application before or without confirming it, you should check it. The loan, credit card, or other application may be rejected by the lender. A regular credit score check may, however, be necessary at other times as well. The following are examples of when a borrower should verify their CIBIL score.

While carrying out the Balance Transfer

Before transferring the existing loan to a different lender with a lower interest rate, check the credit score. You may be able to negotiate a cheaper interest rate since you have an excellent credit score. Check your credit score again after you’ve completed the transfer to see whether it’s changed. When you apply for a loan, a hard inquiry is placed on your credit report. If the lender declines the application, each hard inquiry has the ability to lower the credit score.

When the debt is completely paid off

Paying off a loan, for example, might be a great relief. But do you know how it will influence your credit score? It all depends on your credit history and the credit provider you use. If the portfolio is predominantly unsecured, a credit mix that includes more secured loans may assist improve credit ratings.

While completing Debt Settlement

When a lender and a borrower reach an agreement on a debt settlement, they agree on a lower payment than the initial loan amount. This relieves you of your loan obligation, but it stamps your credit record as settled. If you have additional money, you can get the tag removed if you pay out the whole sum in the future. You can go to the lender’s branch and request that the outstanding late amount be paid. Following that, you will be able to see your credit report and calculate your credit score.

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