Many Indian users prefer using credit cards for payment or purchasing goods online instead of using cash or cheques. The increased use of e-commerce and card usage has led to a rapid rise in the number of credit card users, which means that more people are applying for credit cards.
However, not all users have equal chances when it comes to getting a credit card. Those who have a low CIBIL score will find it much tougher to get one than those with high scores. A good Credit Information Bureau of India (CIBIL) score can act as an entrance exam for getting a bank loan or applying for a credit card.
If you don’t know what is CIBIL score, wondering “How to check my CIBIL score?” or how can you improve it, then read on!
What is CIBIL Score?
CIBIL is a bureau in India that collects information about your credit history and publishes the score of individuals. Every Indian citizen has a CIBIL score – a type of credit score – and they can use it to apply for a bank loan or a credit card. This score is a 3-digit number ranging between 300 and 900. It basically measures your ability to pay back a borrowed amount to a financial institution. There are ranges of credit scores representing whether yours is very bad, bad, good, or excellent. A credit score of between 750-900 is considered good or ideal.
What is the Importance of CIBIL Score?
As mentioned, this score is primarily important for checking your creditworthiness by financial institutions in India. That translates into other critical benefits in your financial management like:
- Low-interest rates on loans – As a borrower, perhaps more than the amount being borrowed, you’d be interested in the interest rates; the lower the more attractive. From a lender’s point of view, the higher the chance of repayment, the more is the convenience of lending at a lower interest rate. So, a good or excellent CIBIL score can not only get you fast loan approvals, but it can also get you low-interest rates!
- High loan amount access – Sometimes even though a bank agrees for granting a loan, it may not approve the same amount you asked for; rather a smaller sum. The chances of getting a high loan amount increase with a higher credit score. Because the lending party assessing your CIBIL score will have great trust in your ability to repay it.
- Long loan repayment tenure – When it comes to loan repayment, what is relieving is not just a low-interest rate but also long loan repayment tenure. It enables you to plan your finances without much stress or corner-cutting. To attract more lenders, a financial institution may offer competitive loan repayment tenure but as a filter ask for a brilliant credit score.
What Factors Negatively Impact CIBIL Score?
The CIBIL score is calculated by combining the credit information collected from various public sources, along with the information provided by the applicant. The various factors contributing to its dip are:
- Irresponsible payment history of loans and EMIs
- Excess credit utilization on a regular basis
- Outstanding loans
- Paying back only the minimum due amount
- Applying for multiple credit card requests
- Not having a healthy mix of secured and unsecured loans
- Closing a credit card, as with it you lose your credit history
- Making no credit card transaction reflects as credit file inactivity
By extension of the very same factors, your can figure out what are the best practices to follow for improving your credit score. That, in essence, would include making timely repayments in full and keeping your credit card activity frequent. In addition, experts recommend tracking your credit report every once in a while for any discrepancies because there can be faults due to delayed reporting or wrong information. As soon as you notice a discrepancy, report it to your issuing bank to get it corrected or it will impact your credit score.
How to Check My CIBIL Score?
You can check your CIBIL report annually for free directly from the TransUnion CIBIL Limited. You can also request your bank for it. However, for convenient credit score tracking, you can activate Credit Shield. It has partnered with CIBIL to offer credit reporting services worth Rs. 1200 for free through its platform. In addition, it can also send reminders for pending credit payments, loan amounts, and EMIs.
An individual’s CIBIL score can have a major impact on their financial future. With a credit card, it is advised that you borrow only what you need, repay your loans on time, and fully in order to improve your creditworthiness. Start your credit journey, if you don’t have one. It requires no credit history, is completely online, and offers great deals and discounts!