CIBIL stands for Credit Information Bureau (India) Limited.CIBIL depicts TransUnion CIBIL Limited, an Indian company that has access to all credit information available on Indian citizens In simple terms, the CIBIL score is a consumer’s credit score. It is a three-digit numeric indication of a consumer’s creditworthiness, credit profile, and credit history. Numerous factors come into play when determining the CIBIL score such as past credit behaviour, borrowing, and repayment habits shared by banks and lenders regularly. It lies within the range of 300 and 900 and is of utmost importance for consumers looking to become regular or seasonal borrowers.
CIBIL has access to 600 million people’s credit information and also consists of 2400 members that include lenders of all varieties. The fact that CIBIL is one of the most trusted credit information companies in India, the score provided by it is considered as one’s credit score.
Why is your CIBIL Score Important?
The CIBIL Score reflects the consumer’s creditworthiness. When a consumer’s CIBIL scores are high, it indicates that the consumer has borrowed and repaid the credit responsibly in the past. It is vital as it showcases how dependable or risky a consumer is as a borrower. All these determine whether or not the consumer is given access to a loan, the terms of repayment, the rate of interest charged, and so on. Due to the increase in the volume of borrowing in the past decades, the lenders have to avert risk and therefore judge the potential risk in lending the consumer any money. The CIBIL score is very critical when it comes to unsecured or collateral-free loans and can determine the eligibility of personal loans to a grave extent.
It is a detailed document highlighting the consumer’s entire credit history and record. It includes personal information, contact information, credit limit, employment history, credit balances, and dates of various account openings. These are generally viewed by creditors, landlords, and lenders like banks and non-banking financial companies.
It is advised that the consumer regularly check their CIBIL report to ensure every element is in place and pay special attention to the sections of Credit Summary, Account History, Public Records, and Credit Inquiries.
How is the CIBIL score computed?
- The repayment history of the consumer consists of 35% of the score. Timely repayments of credit and loans borrowed positively reflect on the score.
- The ratio between the total credit available and the amount of actual credit used contributes to 30% of the score. The lower the ratio, the higher the score.
- The duration of availing credit i.e the repayment duration and timely repayment within the said duration contributes to 15% of the score. The shorter the duration, the better it is for the score.
- The recurrence of credit inquiry makes up for 15% of the total score i.e each time there is an inquiry from the consumer’s end, the score is impacted.
- The existing credit mix makes up for 10% of the score i.e the balance of secured and unsecured loans as well as short-term and long-term loans.
CIBIL Scores can be checked for free or for a very small fee on the internet. Several reputed companies which specialise in this offer such accurate services.
Market trends suggest that it is vital to maintain a healthy CIBIL score between the range 800 and 900 to easily access loans, borrow credit, and so on. There is no escape from this as the world of finance is heavily digitised and all the required records and information are easily available to all.