A CIBIL score is a 3-digit number that reflects an individual’s creditworthiness and repayment capability. Ideally, the maximum CIBIL score is 900; however, a good score is considered anywhere between 700-900.
The higher one’s CIBIL score, the more creditworthy they are and likelier to avail of a substantial loan at a competitive interest rate along with other crucial benefits. Additionally, most financial institutions prefer applicants with a high CIBIL score and often approve their loan applications more quickly.
Given the importance of CIBIL score in availing a loan, it is crucial to know more about the maximum CIBIL score, credit score for loans, and how to improve them.
What is a good CIBIL Score for different loan products?
CIBIL score plays a crucial role in enhancing a borrower’s borrowing experience. Typically, the RBI-approved credit rating bureau CIBIL is responsible for the credit scores of entities based on the financial information given by lending institutions and banks.
Though 300 is the minimum CIBIL score, a CIBIL score between 700 and 900 is deemed favorable for all financial products. A good CIBIL score enhances a loan applicant’s likelihood of getting approval for lucrative features and simplifies their borrowing experience.
A good credit score makes it easier to avail of a loan at a flexible repayment term, flexible tenure, and low-interest rate. Applicants with higher CIBIL scores are also subject to quicker and easier documentation, which makes availing of loans easier.
In the case of secured loans like loans against property, applicants with maximum CIBIL score are likely to avail of a high loan against the leveraged property or security’s value, like up to 70% of the security’s current market value. For unsecured loans like personal loans, a high CIBIL score helps avail financial assistance through minimal, at the least through minimal, documentation and verification process.
Which factors affect CIBIL score?
Several factors influence an individual’s creditworthiness, some of the most prominent ones are discussed below. Credit rating agencies consider an applicant’s credit history for 3 years to score them, and the new algorithm scores an individual with a credit of the account of less than 6 months. Since a drop in credit score affects the borrower’s ability to avail of funding, it’s crucial to know which factors affect their borrowing capacity and their minimum CIBIL score.
Paying EMIs or credit card bills past the due date can affect credit scores negatively. Missing the deadline, even by mistake, projects the borrower as an irresponsible person concerning managing finances and impacts their creditworthiness.
This is why it is crucial to repay EMIs and credit card bills on time and keep repayment history spotless. Individuals can set up an auto debit facility or set reminders and pay EMIs on time to avoid payment delays.
High utilisation of credit limit
A credit limit is set for an individual after considering their debt and income ratio. However, exceeding the same beyond 50% on a regular basis can jeopardize their credit score. This is why it is advisable to try and keep the credit utilisation ratio between 30-40% to keep credit scores from falling. Another tip is to maintain old credit card accounts by keeping them active.
Having multiple credit applications
Applying for multiple credit options within a short window paints the borrower as someone who is credit hungry. Also, having multiple active loan accounts makes financial institutions doubt an applicant’s ability to repay loans on time and makes them at default risk. Hence, it is advisable to avoid applying for multiple loans at once.
Notably, when a loan application is reviewed, it leaves a hard enquiry on the borrower’s credit profile which tends to hamper the credit score and stays on their record for a significant time. Also, when an application gets rejected, it erodes the applicant’s credit score as well. Applying for more than one loan at once amplifies these risks and affects the credit report significantly.
Overlooking mistakes in the credit report
Sometimes the credit report fails to register the closure of a loan account or payment of loan installment on time. This omission hampers an individual’s credit report and repayment history, in turn hampering their credit score. This makes it imperative that individuals check their credit reports carefully to eliminate the risk of omission or misrecording of loan transactions to protect credit scores.
Steps to check credit score
By following these steps, one can check their credit score easily:
Step 1: Visit CIBIL’s official website
Step 2: Select the ‘Get your CIBIL Score’ option
Step 3: Enter name, your email ID, and password.
Step 4: Attach ID proof like your passport number, PAN card, Voter ID, or Aadhaar. Enter the area PIN code, phone number, and date of birth
Step 5: Proceed to click on the ‘Accept and continue button
Step 6: Enter the OTP sent on the registered mobile number and select the ‘Continue’ option
Step 7: Click on the ‘Go to dashboard’ button to check your CIBIL score
Step 8: Subsequently, you will be directed to myscore.cibil.com
Step 9: Click on the ‘Member Login’ option
Step 10: Enter log in details to check your CIBIL score
You can also check your CIBIL credit rating in these easy steps:
Step 1: Visit the official CIBIL website
Step 2: Click on the ‘Know Your Score’ option
Step 3: Fill up an online application form with ID proof, address proof, loan history, date of birth, etc.
Step 4: Accept changes made to the form
Step 5: Once redirected to the payment page, choose a payment mode from the available options
Step 6: Pay Rs. 550 to CIBIL to avail credit report
Step 7: Post payment, authenticate your identity with CIBIL by answering 3/5 credit history-related questions
Once these steps are covered, the credit report will be sent via email within 24 hours. In case the authentication fails, the hard copy of the CIBIL report will be mailed to your address at the earliest.