- HOW IT WORKS?
- Credit Score & Report
- Credit Bureaus
CIBIL Score Background:
In the good old days of yore, folks were blissfully unaware of credit history or anything close to the term. With time, financial wisdom, knowledge and behaviors have evolved. People began to realize the importance of credit history and its importance in deciding their financial future. Slowly, yet surely, financial discipline and behavioral patterns changed for good, with people realizing that a good credit record can yield good benefits like loans, credit cards and much more, culminating in a more prosperous financial well-being for them. Ironically, in India, though, there were neither agencies nor bureaus for people to keep a track of their credit behavior. To address this need, eventually, three credit bureaus sprung up starting with Equifax, Experian and CIBIL. Then there came CIBIL (Credit Information Bureau India Limited) in the year 2000 to the rescue of many financially active and disciplined people. The arrival of CIBIL was not just good news but an alarm for many who may have defaulted on the loans or someone who might not have paid their credit.
With an evolved financial acumen, came the importance of maintaining a good credit behavior and keeping track of one’s financial standing. People became familiar with terms like “Credit score” and “Credit report”. A credit score is also referred to as CIBIL score and is a numeric expression that forms the basis for a credit report. A credit score ideally is a three-digit number that ranges between 300-900 and it projects the creditworthiness of an individual. It is derived out of all the financial information collected from the banks about an individual. That simply shows the individual’s attitude and commitment towards making payments towards his/her loan payments, credit card payments and any other credit payments to banks and financial institutions. There are many factors that are considered in order to arrive at a good or bad credit score. If an individual is diligent towards any type of credit borrowed from the banks, the credit score is good or vice versa.
CIBIL score range:
For example, any person who has a credit score between 300 and 700 is not considered for lending in most of the cases. Whereas any credit score which is near 700 or above is considered for lending. So, a CIBIL score is calculated with certain algorithms and conditions, and only when they are satisfied, are given some weightage. Some of the conditions like repayment of previous loans or credit cards, utilizations of credit limits on credit cards approved, outstanding balances on loans and credit cards, the time period the accounts were held by the individual, and lastly the weightage is given to inquiries or credit checks made on the individual. All these parameters contribute to the credit score and a three-digit score on the higher side is given if and when all these criteria are met, else it is going to result in a bad score. Sometimes, the credit score in some reports show “NA”, which apparently means the customer has never had any credit history and this will have a negative impact when that customer is seeking any credit in future. Because if there is no credit history, then how would the bank know the credit worthiness of a customer? So, it is always better to have a good credit score rather than not having any score at all.
Factors affecting CIBIL score:
The list of factors that affect the CIBIL score are as follows:
- Payment history on loans, credit cards etc.
- Duration of loan accounts and credit card accounts held
- Utilization of credit limit on loans and credit cards.
- Closing of loans and credit cards on or before making payments
- Payment defaults
- Pre-closures with or without co-operation between banks or financial institutions
- Being a guarantor on the third party lending
Hence, these are all the factors that affect the credit scores of an individual. Now how does this credit score impact one’s financial well-being? A credit or CIBIL score plays an important role in an individual’s life when it comes to borrowing credit from banks and financial institutions. That means a person will get a loan approval depending on how good his/her credit score is. The higher the credit score is the better the chances of the loan approval from the banks and financial institutions. However, this approval totally depends on the banks and their bank policies also. Hence, there would be a cutoff credit score for each bank and if at all the customer meets that cutoff score then there are fair chances of the loan getting approved or not. So, each bank has their own policies and cutoff scores in order to qualify for a loan or credit card approval but irrespective of one needs to have a good credit score.
How to get CIBIL score online:
Now how can one get a credit score online? CIBIL score or Credit score can be checked online on through the official CIBIL website. It is considered one of the easiest and convenient ways to check a credit score but it comes with a nominal fee. There are updates from various sources that there would be a free credit score or credit report from CIBIL every year starting from January 2017 onwards. Once this happens, checking or getting a credit score or report at least once a year will be feasible for many.
But as of now, in order to get a credit score one has to fill in that online credit score request form the website in order to get the score. The form would ask for the personal details, address proof, ID proof, income details etc. to be filled. Once these details are submitted, the next step would be to make a payment using a payment gateway through credit or debit card or net banking. Once the payment formalities are done CIBIL would definitely verify the details submitted. So there would be an authentication of details is done and only then there would be a credit score sent to the customer. If the authentication fails, then that means the customer has to go through the complete process once again to get the score.
These days, with rising demand, many companies have burgeoned and ready to help you with your credit score or report free of cost. “Creditseva” is one of the leading agencies specializing in providing financial services and advice. If you want your credit score to remain at the helm, look no further than ‘Creditseva’, their expertise is unmatched and their financial advice in terms of how to maintain a good score and the overall benefits you can avail from doing so is very dependable.
Now that we know what a credit score is, what factors affect the score and how you can check your credit score; let’s learn about some of the benefits of having a good credit score. A good credit score can prove beneficial, especially in terms of getting credit from banks and with attractive and preferential interest rates to boost; your chances of getting loans or credit cards become brighter than ever, higher limit approvals on loans and credit cards, better home/automobile loans etc., are some of the benefits of having a good credit score. So, what are you waiting for? Go get your credit score and see if you’re financially healthy.
CIBIL Score FAQ’s:
1. Why is CIBIL score so important?
Needless to say, a credit score plays a major role in loan application process. After the application is filled and formalities are done, the lender usually needs to check the creditworthiness of the borrower. A good credit score plays an important role in loan application approval, the better the score the chances of approval are more and vice versa.
2. What is a good/bad range of CIBIL score?
A credit score is a three-digit number in the range of 300-900 that is issued by a credit rating agency. A score is considered bad when it is less than 650. The higher the score the better the score, so a score of 750 or above is considered best score. Banks are reassured that there are a good repayment history and low-risk customer.
3. Can we get a CIBIL score online?
Of course, you can get a CIBIL score online. However, there are some formalities that we need to fulfill in order get the score sent to email or mail. There are some companies that help you get the score online free of charge, one of them being “Creditseva”.
4. Is it safe to take help from agencies to get the score?
Agencies which help you get credit scores or reports are safe to use. Provided those agencies are authorized by the government of India with a proper license and tie up with the top most banks.
5. How often do we need to check the CIBIL score?
It is advisable to check your score every 3-6 months if possible. One should check the score at least once in a year.
CIBIL Survey finding: 74% of Indians check their credit scores twice a year
04 July 2017:
Mumbai: According to a recent survey conducted by TransUnion CIBIL, it was found that 74% of Indian consumers check their CIBIL scores atleast twice a year. It was found that youngsters in the age group of 18-24 were more vigilant being 49% of the total as compared to those above 45 who were just 20%.
The survey also found that consumers with a high income of above 5 lakh checked CIBIL report twice a year as compared to those with low income. Out of all the participants of the survey, 77% of them were middle-class consumers.
The report helped CIBIL conclude that credit score is an integral part of a consumer’s financial health as it can help them purchase a home, car or take credit card. The findings also revealed a need of stronger credit education.
Bank can now Check 36 months Credit History of Borrowers
07 June 2017: Banks are equipped with more information than before, and hence they can now tell which cardholder is likely to default. The new algorithm based system introduced by CIBIL offers an opportunity to banks and financial institutions to judge which customer can default based on the report.
Several banks are testing this tool before they decide to introduce the same in their credit appraisal system. Many banks are expected to go live with the tool in a couple of months said Harshala Chandorkar, the CEO TU-CIBIL. This system will help the bank to offer loans to non-customers and hence create a new customer base.
CIBIL report of more than 750 is considered as good credit risk. The introduction of new CreditVision tool provides additional variables to financial institutions and help them make informed decisions.
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