- HOW IT WORKS?
- Credit Score & Report
- Credit Bureaus
CIBIL Score: Overview
A Credit or CIBIL score is a key indicator of your financial prosperity and plays a pivotal role in the credit approval process of banks and financial institutions. We know that the CIBIL score is an integral element of a credit report. The higher the score, the better your credit worthiness and better are the chances of credit approvals. Likewise, a low credit or CIBIL score obviously means it’s risky to lend money to you as an individual. A credit score is typically between 300 and 900, a score less than 700 is considered risky, and the chances of loan or credit approvals are slim; a score higher than 750 is preferred for lending. In fact, a credit score over 750 is considered excellent and the chances of getting competitive interest rates are good.
To be more specific, if your CIBIL score is greater than 700, chances of your loan getting approved are brighter. That said, the acceptable credit score range differs from bank to bank as it’s based on the credit policies of the individual banks. The maximum CIBIL score to get a loan would be closer to 900.
Break-up of Credit score:
To illustrate our point, we are listing below a break-up of some score ranges and what they mean:
|0||No credit history in the past|
|350-550||Bad score with some default on payments in the past|
|550-650||“Ok” score, may or may not be considered for credit approvals|
|650-750||Good score and will definitely have a positive impact with few benefits|
|750-900||Preferred range to be in|
Now that we have a fair idea of what the different score levels mean, let’s see how we can consolidate and keep improving on the score. If a score is anywhere above 750, then it’s fine but the problem is if it plunges below 700. In such a scenario, you will need to have a serious plan in place to come up with measures to improve the score.
So, it’s a no-brainer that the credit score is one of the most crucial deciding factors of one’s credit history and credit worthiness. Its helps you stay in the good books of the banks, as well as get some good lending support. Now, how can we actually maintain a good credit score or work towards improving a credit score? The answer is quite straight forward, and can be achieved with proper planning, discipline and perseverance.
Here are a few tips and tricks to improve your credit scores:
- Credit report checking frequency: Checking your credit report at least once in six months is a good idea. It tells you where your credit score stands, and also tells you when and where the payment delinquencies are. That gives you detailed information about where you stand and how you can work towards getting it clarified with the banks. Now this clarification process cannot be done personally, you need to approach CIBIL in order to get it done. In addition to CIBIL, there are some agencies which help you especially in getting through to the bureaus and banks for such queries, Creditseva is one such group. They act as the channel between you and the bureau to get such corrections done and provide all the guidance you need. You can visit creditseva for more details.
- Constant applications for credits: The more you apply or request for loans and credit cards, the more you get rejected, and the worse your score becomes. So while applying for credit cards or loans that come your way may seem a good idea, the actual damage happens when you get rejected for inexplicable reasons, as a result, your credit score comes down, making it difficult for you to maintain a good score. This is why you should refrain from applying for too many loans or cards that come your way unless you need them.
- Timely payments: When we say timely payments, we not only refer to credit cards but also loans. Should there be a delay in making payments on your loans, it is time to make it a priority to make them on time. If you are struggling or facing problems in making payments, then it’s recommended to talk to your bank and restructure you loan payments instead of ruining your credit score. The single most important thing to do in case of credit cards is to stay well within the limit i.e., not going extremely close to the card limit and not using all of it. When making payments to the credit cards, it is better to make a complete payment or at least a good amount of it. Only then the score will be better when it comes to credit card payments.
- Borrowing behavior: When it comes to borrowing credit from banks, if you apply for too many loans or credit cards, it only projects you as “credit hungry”, and this will definitely have a negative impact on your credit score. The more you ask and apply, the lower your score becomes. So, borrow only if it’s absolutely necessary.
- Settlements: Should a bank approach you with the option of settling a loan or credit card given by the bank, do not go for it. Because settlements mostly mean approaching banks and making a deal with them to close a debt with an amount slightly lesser than what needs to be paid, while banks usually agree to it and settle the deal. But this shows on your credit history and will affect negatively on your credit score. This also results in not getting any approvals at all.
- Signatory or joint applications: If you are, or want to be a joint applicant or a guarantor or a signatory on any loans for your friends, please be sure that they are diligent with their payments. Should they default on their payments, or if their credit history in any way is adversely affected, you will also land in trouble, with your credit history getting affected negatively.
The bottom line is that there are two basic rules to bolster your credit score — Keep your balances low and pay your bills on time (and try to pay all of it, if possible). Follow these two rules, and see your credit score rise to a healthier level. You can then further improve or balance your score with some of the tips detailed in this article. Ignore these rules at your own financial peril.
CIBIL Score FAQ’s:
1. What is the importance of Credit score?
A Credit score is the face of your financial health and speaks about your creditworthiness. So if you have a good score then there are chances you can get lending easily whenever there is a requirement. If a credit score is bad, then the effects are bad. Hence, it is important to keep a track of your credit score and always be on top of it.
2. What is the ideal credit score range?
A credit score anywhere from in between 750-900 is considered an ideal score. However, the higher the score towards 900, the better chances of getting a loan approved. So it is always better to be above 750 score at any point of time.
3. Is it good to have settlements with the banks?
Making settlements with your bank does not yield you good results always. Making a settlement with a bank means playing around with the credit score. You might end up paying a little lesser than what is outstanding but it will have a negative impact on the credit score.
4. What if you are a guarantor, does it affect credit scores?
If you are a signatory or guarantor on someone’s loan, your credit score will definitely have an impact. If at all they fail to make payments, your credit score will go down and vice versa. Being a guarantor will not only affect your score but also will make you liable for the outstanding amount on the loan or credit card.
5. Can a CIBIL score be improved?
Now that we know that the credit score is derived from the overall borrowing history, if we follow some diligent rules we can definitely contribute towards increasing the credit score.
6. How does being “credit hungry” impact your credit score?
The more applications on your profile the negative the impact on your score. So it is better not to apply for more loans or credit cards until and unless it is necessary or emergency.
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