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WHAT IS CIBIL SCORE/CREDIT SCORE EASY EXPLANATION

CIBIL Score



WHAT IS CIBIL SCORE/CREDIT SCORE

Friends many people take a loan from the bank for buying houses, cars, or to do business. In this case, many people get loans easily and many people face lots of problems getting a loan they haven’t get a loan. Because of the CIBIL score or credit score.


For kind your information to approve any loan credit score or CIBIL plays an important role.

Friends now a question arise that what is a credit score or CIBIL score and how to CIBIL score check for free. So let’s know about this.


Credit score which is also known as CIBIL scores it’s a number who’s decided that you are eligible to get a loan or not.

In this score, the loan provider or bank checks your previous 6 months' financial score. If you pay a previous loan or credit card on time. So the credit score will good.

But if you do not pay loan EMI on time so the probability to get the new loan is very low.

To take a loan your CIBIL score must be 750+.

There are some ranges of CIBIL score to determine.

300 to 559: Very poor
560 to 659: Fair
660 to 724: Good
725 to 759: Very good
760+: Excellent

Friends Transunion CIBIL Limited is India’s first credit information company this company has over 55 million+ companies and employs credit score available.



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WHAT IS CIBIL SCORE OR CREDIT SCORE?

A civil score is a credit score of a person living in India that means before a bank or financial institution can loan you.

 For any amount of money for whatever purpose is it a credit card is it a personal loan, be it a car loan or be it a home loan they would like to check your creditworthiness.

In simple terms, they want to ensure whether you will pay back or not so there is this agency which is set up by the government.

 Where all the banks share the creditworthiness of all their customers
 So is this big database that CIBIL has which kind of keeps on getting reports from the bank every time you pay EMI or you pay your credit card bill or you pay back your loan.

So next time when you go to borrow depending upon the CIBIL score you will be offered a loan package.

 So how does it help you well if you have a better CIBIL score you can get cheaper?

CIBIL score or credit score it’s a number between (300 -900). If you are closer to 900 it is a better credit score to getting any loan or credit card.
So when you go to a bank and apply for a loan the first thing that a bank does is check your CIBIL score.

Here I provide important Check Points on Basis of CIBIL Score.

      1. Bank checks the creditworthiness of an individual before offering a loan.

      2.CIBIL Score: - A 3 digit Credit a score of an individual that indicates his creditworthiness.

      3.An assessment of whether an individual will paybacks the loan.

      4. Range 300-900.

      5. All Banks and Financial institutions share their Credit Data with CIBIL.

      6. Transunion CIBIL maintains records of 600 million individuals and 32 million businesses.

      7. CIBIL score is mainly Based on

       ·   Repayment History

       ·   High Credit utilization

       ·  Multiple Inquiries

       ·  Credit Mix

      8.  Better CIBIL score means cheaper loans and faster approvals

      9. Lower CIBIL Score means delayed approvals/rejection of loans

      10. 750+ is a good score

      11. NA- No credit activities in last a couple of years

      12. NH-No credit History i.e. either you are new to the credit system or you don’t have enough credit history.

How to improve your CIBIL score or credit score

First of all, we need to understand the four key factors. Factors which affect the CIBIL score. So what are these let’s take them?



      1. Payments

      2.Utilization of your credit Limits

      3.Higher Percentage of unsecured Loan

       4.Behaving credit hungry.

Let’s discuss each of them one by one.

Payments

The first and foremost thing that affects your CIBIL score is your payments.

 So if you are paying late or if you have skipped one or two of your installments whether it’s a credit card or a car loan or a home loan or a retail loan whatever loan it maybe.

   So if you are paying late or if you are not paying in the time or if you have skipped one or two EMI it severely impacts your credit score and it goes downwards.


Utilization of your credit score

The second important factor is the utilization of your credit limits.
This is more so for your credit cards where you have been prescribed the credit limit and if you are like fully utilizing your credit limit or you are nearing the edge of the utilization.



 Then again it hits your credit score where the credit card company and the bank start thinking that since you are ending up using more of their money so again that hurts your credit score.


A higher percentage of unsecured Loan

The third thing that hits your credit score is the higher percentage of unsecured loans is a new term.

So let me explain there are two types of loan one is a secured loan and the other is an unsecured loan.


Secured Loan or Unsecured Loan

A secured loan is a loan where you have offered collateral security to a bank.

 So if you take a car loan and if you don’t pay your car loan the bank has the right to take back the car so that means the bank has secured the money financed to you by an asset called a car.

 As in this case, when you take a home loan so they may take back home, they may throw you out of your house if you are not able to pay the home loan.

 But in the case of a credit card or recourse they are purely relying upon your ability and willingness to pay the money back so if you have a higher percentage of unsecured loan in your portfolio than again your credit score may go down.



Credit Hungry

Last but not least what affects the credit history of a person.

Let’s say if you are getting too many phone calls for a loan if you say yes to everyone and if you keep on providing your documents and every bank is trying to process a loan application for you what happens is that too many inquiries coming to CIBIL to know your credit score means CIBIL start thinking that either you are in need a lot of money or you are trying to bargain hunt between different banks.

So that also can have a significant impact on your credit score.

So what you need to do is to keep your spread it scores healthy or if it is already deteriorated you need to take care of these four parameters.

     1. Don’t pay late

      2. Credit limit in the control

      3. Don’t take too many personal loans that are unsecured in Nature.

      4. Don’t apply for a loan if you don’t need

Brief Detail each of them.

Don’t pay late


 If you are running short of money make sure that at least you pay the minimum amount you regularly on time every month before the due date.

Credit Limit in control

Don’t utilize too much of your credit limit and try to limit your spending.

Don’t take too many unsecured personal loans in Nature

So if you are buying a capital asset or an FMCG item or a white good trying to take a secured loan with EMI where a bank has recourse to an asset that way you will have an asset you will have the money and yet keep your credit score healthy.


Don’t apply for a loan if you don’t need

So if you don’t need a loan and especially don’t apply for a loan simuntensouly at four or five banks and financial institutions because that can severely affect your credit information.



These are the basic hygiene as we call it if you want to keep your credit score steady.

 But in case you feel that the bank is cheating you or bank withholds the information by not sharing it with CIBIL because many times we come across the situation.

 Where you have paid your loan you have obtained a NOC (None objection certificate) from a bank but still when you go back to buy another loan. Your CIBIL score is not that great.

So this is the most important information about the CIBIL score or credit score. I hope you enjoy it and understand the basic and major terms of the CIBIL score.


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Sam
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May 9, 2020 at 11:58 AM

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