Every country needs to have a solid financing system to support economic development. India too is emerging as one of the biggest markets for financing. With quick and easy instant cash loans offered by banks and NBFCs, the country has witnessed a high spike in its economic transactions. Today, you can easily avail a quick personal loan by downloading the best loan app. But to facilitate this easy borrowing and lending it is very important to have a safe and secured environment for credits. This is where a credit bureau comes into play.
Credit bureaus are specialized financial organisations that gather and retain information about a person’s credit behaviour in India. They create a credit report and credit rating for specific debtors using this data. This includes your past borrowing behavior, repayment records, existing debts, defaults on EMIs, credit card debts, etc. The credit bureau assigns every individual with a 3 digit number based on all these parameters. This number is called the credit score.
CIBIL (Credit Information Bureau (India) Limited) is one of the four most trusted credit bureaus operating in India. It is a credit information company licensed by RBI. The credit score assigned by CIBIL is also called as CIBIL score. Many lenders track your CIBIL score before approving your loan application or determining your loan amount eligibility. It also affects your interest rate levied on the loan.
Thus, it is very important to understand these terms before applying for a loan.
What is a credit score?
Your credit score indicates your creditworthiness. This score is determined after accounting for your credit history, which includes the number of credit accounts, total debt, and repayment history. Additionally, the quantity of inquiries made during the recent time is also taken into account when computing your credit score.
The score is a three-digit number ranging between 300 and 900. This number represents your credit history and your current financial status. Lenders rely on this score to estimate the risk associated with your profile.
If your credit score is low, then lenders may reject your loan application or offer you a loan at a very high interest rate. This is because the risk associated with your profile is very high and the lender doubts your repayment capability. Whereas, a high credit score makes you a highly potential customer. Thus, the lender might offer you attractive features on the loan.
What Is a CIBIL Score?
Credit Information Bureau (India) Limited, also known as CIBIL is a credit rating organization. It was established in 2000 and is India’s oldest credit information provider. Today, CIBIL is one of the four main credit bureaus in India and is trusted by many Indian lenders to provide an accurate analysis of the borrower’s profile.
You can check your CIBIL score free of cost. Simply go to www.cibil.com, the credit bureau’s official website, to check your CIBIL score. Your credit and loan-related information, including your CIBIL score, are tracked in a CIBIL report, also known as a Credit Information Report (CIR). This credit information report gives you all information regarding your credit history and track of all your debts.
Credit score Vs CIBIL score
Your credit score can be assigned by any credit bureau licensed by the RBI. In India, there are four major credit bureaus – CIBIL, Experian, Equifax, and CRIF Highmark. However, a CIBIL score is explicitly assigned by the CIBIL bureau.
Your credit score can be different from your CIBIL score as different bureaus have different parameters to calculate your credit score.
Though most lenders check your CIBIL score to analyze your loan application, some lenders may consider an average total of your credit score assigned by all the major bureaus. This is why it is important to keep an eye on your credit score assigned by these bureaus.
Tips to Maintain a Good Credit Score
Here are a few tips to maintain a good credit score.
- Pay off your credit card debt promptly.
- In case of rejection of the loan, wait for some time before reapplying for the loan.
- Balance your secured and unsecured credits.
- Do not submit multiple loan applications.
- Pay off your previous dues before applying for a new one.
- Check your credit score assigned by different bureaus every quarter.
Tips to Maintain a Good CIBIL Score
Here are a few tips to maintain a good CIBIL score.
- Keep a good repayment history.
- Never miss credit card or EMI payment.
- Make sure that all credit card bills are paid in whole and on time.
- Maintain a credit utilisation ratio (CUR) of less than 30%.
- Check your CIBIL score once a year and report any discrepancy on the report to the bureau immediately.
Conclusion
In conclusion, a credit score is a three-digit number ranging between 300 to 900 that is assigned by a registered credit bureau. CIBIL is one of the most trusted credit bureaus in India and the credit score assigned by the CIBIL authority is known as CIBIL score.
This score plays a very important role when you apply for instant cash loan. Whether you apply for the loan by downloading the best loan app or go the traditional way and apply through the branch, the lender will check your credit score. Your loan eligibility, loan amount, interest rate and several other features of the loan will depend on this score. This is why, it is very important to maintain a healthy credit score at all times.
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