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TransUnion CIBIL – Know Your credit score better
Whether you are in business or into salaried employment, if you are thinking about getting a loan to finance your dream home, car or higher studies, one question will come across your way and that is what is your CIBIL score? Now, often people think the term is CIBIL SCORE, however, the actual term is CREDIT SCORE and CIBIL is an organization which is into credit reporting and risk information providing company now referred to as TransUnion CIBIL. So, whether you call it a CIBIL score or a Credit score, you need it for showcasing your financial credibility.
This article will spell out the details you want to know about CIBIL ranging from its inception to the benefits of having a CIBIL score.
What is a CIBIL Score?
CIBIL score is referred to as a three digit number that shows your financial credibility to the world. The score can be anything within the range of 300-900. Where, anything above 750 is considered to be a good score.
The more your score gets closer to 900, the greater is your creditworthiness. It not only helps you in getting an easy loan or credit facility, in addition to this it might get you a credit at reduced costs. Many financial institutes these days are considering your great credit score as an important criteria to extend credit at preferential interest rates.
What is this CIBIL Score means?
The CIBIL or credit score says a lot about your financial habits and status. It shows whether you are a responsible borrower or not. It also showcases your financial history i.e the money procured and repayment schedules. This information means a lot to the financial institutions who are considering your credit proposal.
What constitutes the CIBIL Score?
The CIBIL score is generated taking into account these four factors
- Payment history which holds 30% of the score.
- Credit exposure which holds 25%
- Credit type and Time period or Duration for which the credit was taken matter another 25% in the score generation
- Other factors contribute to the rest of 20% of the score.
Detailed Analysis of the Factors affecting CIBIL score
- Your Payment History:
The most important factor which influences your credit score is the payment history of yours. Here payment history means the payments you made towards repaying any loan that you took in previous years. It also includes payment towards clearing credit card bills. It takes into account whether the payments are made on time or not. If a payment is delayed by 30 days, then 100 points are deducted from your score as per a report by financial express.
- Amount of credit:
According to your income and assets, your credit limit is decided. Out of this credit limit if you use a major portion of it then your score is bound to get reduced. The credit exposure has an effect of 25% on your credit score. Thus, it is advisable that you must not at any given point in time exceed 30% of the credit limit to have a good CIBIL Score.
- Credit duration and type:
The type of credit along with the duration for which you take it to influence 25% of your Credit score and thus maintaining a good credit mix is important. If you are wondering what is credit mix then this is nothing but how you mix both secured and unsecured credit to strike a balance. The more balanced your credit mix is, your credit or CIBIL score gets higher. The duration of the credit affects the score as well and mostly it has been observed that people with a long credit history are preferred more. This is because a long credit history gives the opportunity to the financial institution to assess the borrower easily and rightly.
- Other factors:
This includes inquiries made by you for credit and within how much time you have made the inquiries. This is important because when you inquire for credit, the financial institute gets your CIBIL score from the CIBIL and that makes a hard inquiry which has an adverse impact on your score and if you check your score that's a soft inquiry which has no impact. This also includes your income and other financial factors under it.
Benefits of Having a good CIBIL score
- It becomes easier for you to get credit from the lenders if you have a good credit score.
- You get discounts on interests that you have to pay for the loan if you have an excellent CIBIL score.
- Your loan approvals are quick because the banks and the lenders (financial institutions) then do not go into introspecting all the documents and bank statements of yours. It saves a lot of time for processing the loan and thus you get your credit within a short span of time.
- It enables and empowers you to bargain more for a reduction in the interest rate. The higher CIBIL score is a better opportunity to bargain and negotiate.
- With a good CIBIL score, you do not only get reduced interest rate on your loans but also a high limit of credits.
- You can also get good offers on credit cards for your high CIBIL score.
Tips to improve your CIBIL score
In the above sections, one thing you must have mentioned is that if you have a CIBIL score, it got to be on the higher side (at least above 750). You must be wondering how you can improve this score and the answer lies in the following points
- Avoid delaying payments: The payment history affects your CIBIL score as mentioned above, you need to be very particular about paying the EMIs, credit card bills on time. The more time you repay your credit timely, your chances of having a good credit score improves.
- Use a minimum portion of your credit limit: You might have a huge credit limit on your credit card, but do not use it completely as that adversely affect your credit score. Always try to use less than 30% of the credit limit you have on your credit cards and other lines of credit.
- Always close your accounts: If you do not close an account by paying off all your dues then it negatively affects your score of CIBIL. If you have defaulted or missed payments, pay them immediately and close the accounts. If you go for settlement and not the closure of the accounts your CIBIL score gets reduced.
- Be responsible: Finally, you need to be serious and responsible about your lines of credit, use them efficiently and also keep a check on your CIBIL score from time to time to have a great score.
CIBIL is an organization for credit reporting and also a risk information provider for the world. The score generated by CIBIL for individuals and business is important when they apply for any credit from financial institutions. The score is within 300-900 and anything above 750 is considered to be good. The factors affecting the score are payment history, credit exposure, type and duration of payments and credit inquiries. Forgetting a high score and to improve your CIBIL score which is already there you have to be responsible about using your line of credit, pay EMIs and credit card bills on time, have a longer credit history and balanced credit mix and have less number of hard inquiries. The CIBIL score helps to get quick approvals on loans, best interest rate, and credit limit.
Frequently Asked Questions
Q- What is the full form of CIBIL?
It is the Credit Information Bureau (India) Limited.
Q- How CIBIL get all your information related to your credits?
Banks and financial institutions in India are required to submit all customer's financial data to the CIBIL and then it prepares the report and generates the score.
Q- Is CIBIL safe for my financial data?
It is registered under RBI as a licensed credit bureau and thus it takes all measures to protect your financial and sensitive data.
Q- How to check my CIBIL score?
You have to pay a fee of Rs. 550 if you opt for a paid subscription for 1 month of unlimited access. For bi-monthly you have to pay Rs. 800 and Rs. 1200 for an annual subscription. You also get 1-time free access on this site to check your score.
Q- How does your income affect your CIBIL score?
Often people think that having a high income will get them high credit limit and also improves the CIBIL score. However, the CIBIL score is not affected by your earnings neither you can get a higher credit limit because your income is high.