CIBIL is the Credit Information Bureau of India, which is a non-profit organization working towards improving access to credit and financial services. The CIBIL system is used by various lenders in deciding on your eligibility for a loan and how much they should lend you. This article looks at what CIBIL score means, why it’s important, how to calculate your own CIBIL score, as well as some useful tips if you want to improve your CIBIL score in no time.
What is CIBIL Score?
CIBIL score is a numerical representation of your creditworthiness, calculated based on your credit information. The credit information includes your credit history, repayment ability, credit usage and type of credit you have. As of May 2017, CIBIL offers only Indian credit data for all Indian citizens. However, credit information from other sources can be used to calculate your score. CIBIL score ranges from 300 to 900. A CIBIL score of 700 and above can qualify you for loans at low interest rates. Lower CIBIL scores can lead to higher interest rates, and even a denial of credit. When you apply for a credit card or mortgage, for example, the lender uses your CIBIL score to decide how much credit you’ll receive.
CIBIL History and Development
CIBIL was established in 1999 as a credit information bureau to collect, consolidate and maintain information on borrowers and lenders in India. It was founded as a joint effort of state governments and local financial institutions to improve the ease of credit and savings. After initial trials, CIBIL was launched in April 2000 with the goal of providing credit information to all Indian citizens. As of May 2017, CIBIL offers only Indian credit information for all Indian citizens. The score and other information offered by CIBIL is based on Indian laws and regulations. In the early years of operation, the bureau began with a data warehouse of public records and a client portal for lenders. Soon, the organization received requests from private financial institutions to offer their own data through the portal. Now, the bureau has partnerships with more than 80 lenders, including banks, insurance companies, and FMCG companies, to provide customers with credit information.
CIBIL Score Calculation Methodology
There are several factors considered when calculating your CIBIL score, including your credit information and payment behaviour. Here are the specific factors: - - Credit Information: This includes your credit history, credit worthiness and payment behaviour. - Credit Worthiness: This includes your credit score and the amount of debt you owe. - Payment behaviour: This is the frequency and amount of all payments you have made, including installments and interest.
CIBIL Improvement Tips – How to Improve Your Score
There are a few ways you can improve your score quickly and easily. Here are a few:
- Make your payments on time each month
– The most important thing you can do to improve your score is to pay your bills on time.
- Keep your credit card balance low
– Having a low credit card balance helps your score because it shows you are making payments.
- Keep your overall debt lower
– Having less overall debt is better for your score because it shows you are making consistent payments.
- Select a good lender
– Choosing the right lender is important, as it can make a big difference on your overall score.
CIBIL Scores and Importance in Lending
CIBIL score is used by various lenders in deciding on your eligibility for a loan and how much they should lend you. However, it’s important to note that this score is only relevant for certain types of loans. With a CIBIL score of 700 and above, for example, you can get a loan for home loan at an interest rate of 9.5%. Higher CIBIL scores also increase your chances of getting an auto loan and getting a credit card. If you have a low score, you may have to make payment arrangements with a credit counselor or agree to pay higher interest rates on your loans.
When it comes to credit scores, it’s important to understand what they are, how they are calculated, and how to improve your score as quickly as possible. CIBIL score is just one of many factors used by lenders to determine your creditworthiness. By choosing the right lenders, monitoring your credit score, and making adjustments when necessary, you can improve your creditworthiness and get loans when you need them most.