A credit score generated by the Credit Information Bureau (India) Limited (CIBIL) is a representation of one’s creditworthiness and typically ranges from 300 to 900 on a scale. The score is calculated on the basis of the information provided in an individual’s credit report – a detailed record of their credit history, debts and previous repayments, defaults and delays in payment etc. CIBIL score is one of the most important factors that lenders look into when reviewing a loan or credit application. Read on to know the importance of a good credit score and how you can improve it.
What Is a Good Credit Score?
The minimum CIBIL score for loan as per most lenders is 750+. Thus, individuals with a higher score are often favourably by financial institutions and banks and are more likely to get their credit cards and loans approved faster. The higher the score, the better since lenders view them as low-risk borrowers and financially responsible. On the other hand, having a negative credit report or a low credit score, say below 650, has adverse effects on the CIBIL score.
CIBIL score range for loan can be classified into four categories on a scale of 300 to 900 – with 300 being the lowest and 900 the highest. The classification based on the ratings is as follows –
|Credit Score Range
|750 – 900
|650 – 749
|550 – 649
|300 – 549
How Is Credit Score Calculated?
Credit score is calculated based on a few factors, such as the following –
|Factors Constituting CIBIL Score
|Duration of credit history
|Mix of credit
What Is the Importance of a Good Credit Score?
The following pointers explain why it is important to maintain the minimum CIBIL score for loan –
- The score is an indication of the borrower’s responsible behaviour in terms of the debt payment.
- A good credit score increases the chances of getting a credit card or loan approved faster.
- Lending, institutions and banks consider CIBIL score an important parameter for determining their eligibility. Based on the rating, they decide whether or not the individual is capable or worthy of getting the desired loan amount.
- Individuals with a good credit score (750 and above) are usually considered responsible debtors in the eyes of the lender and hence, have a better scope for negotiating a higher loan amount or credit limit with banks and financial institutions.
- Banks and other lending institutions offer better terms and offers on loans or credit cards to individuals with a higher CIBIL score.
- Based on the credit score, the credit utilization ratio of an individual can be adjusted upon request.
- A good credit score can fetch you cheaper loan interest starting at as low as 8.65%.
How to Increase Your Credit Score?
If your credit score falls below the desired range, you can still get it back on track by adopting a few measures and changing your financial habits. Here are some tips to achieve the minimum CIBIL score for loan –
- Be sure to pay off your loan EMIs, credit card bills, and outstanding debts on time in order to avoid defaults and delays. You can set reminders ahead of the due date to ensure you do not miss out on the payments.
- Maintain a disciplined, clean repayment history to improve your credit rating.
- Avoid making too many inquiries at once as that often leaves a poor impression in the eyes of the lender.
- There can be errors or inaccuracies in the information provided so it is important to check your credit report regularly. File a dispute in case of discrepancies to get them resolved at the earliest and improve CIBIL score.
- Avoid applying for a new credit card or loan immediately after the rejection of your previous application.
- Aim for a credit utilization ratio lower than 30%.
- Make sure you do not have any unpaid balances.
- A few days prior to the due date, submit a cheque to pay off the credit amount.
- Lastly, consider applying for a joint loan or credit to build a strong credit score. However, this will only work if either you or your partner or both have a good credit score, enough to get you the desired credit limit or loan amount.
How to Check CIBIL Score for Free?
To keep a track of your credit score, you can opt for the online CIBIL score check facility offered by almost all lending institutions and third-party websites. Here is how you can CIBIL score check free –
- Go to the lender’s website
- Choose the ‘Check Your CIBIL Score’ option
- Key in your details, including the following –
- Full name
- Email ID
- Date of birth
- Mobile number
- Full address
- ID proof (Aadhaar card/PAN card/Passport/Voter’s ID/Driving license)
- Click on the ‘Accept and Continue’ button
- Enter the OTP number sent on your mobile number/email ID
- Check your credit score displayed on the dashboard
The online CIBIL score check method is easy and free of cost. However, if you want to view your score more frequently, you can subscribe to a specific plan for CIBIL score check free after discussing the terms with your lender.
A good credit score comes with several benefits, including lower interest rates, faster approvals, a high loan amount and credit limit, and better negotiating terms. This is because banks and financial institutions often consider the credit score a key factor for determining whether a borrower is reliable enough or worthy of financial aid. Check your CIBIL score range for loan and take the necessary steps to achieve the minimum score required.