What is CIBIL Score or credit score? How CIBIL Score is important for getting loan or credit card?

Last Updated on November 25, 2021 by Admin

CIBIL Score is most important criteria for getting loan or credit card and this score reflects the financial credibility, capacity to payback loan and eligibility to get loan or credit card etc. of any person or entity. This is basically 3-digit numeric number ranging from 300 to 900 which is mentioned on the CIBIL report of person or entity. Higher the score reflects higher the chances of loan approval on lowest rate of interest and getting credit card on fast-track approval

What is meaning of CIBIL?

CIBIL stands for “Credit Information Bureau of India Limited”.  So CIBIL is basically a credit information company who collects and maintains the data of persons and various entities for their credit related financial transactions such as loans and credit cards.

This kind of data is provided by banks, NBFCs and other lenders on a monthly basis to CIBIL and based on that, a Credit Information Report (CIR) and Credit Score is generated by CIBIL for every person and entity which can be accessed by the lenders while processing processing any kind of loan or credit card.

So CIBIL plays a very vital role of central credit agency for banks, lenders, financial institutions and credit card companies to check the credit history track and score of any person or entity.

Why CIBIL score is important for getting loan or credit card?

If you are planning for Credit Card or any type of loans whether business loan, home loan or personal loan then maintaining a good or high CIBIL Score is very essential. Every lender or banker is supposed to check first your CIBIL Score as part of their compulsory process to decide whether you are capable of paying back in time or if there is any default in past by you.

They may reject your application if CIBIL score is not satisfactory despite of the fact that you may complete rest of all formalities including collateral security or higher networth but loan can not be approved if CIBIL score is low.

Few points are considered while processing loan application or new credit card such as credit history, repayment behavior of past and existing debts, the line of credit, number of existing loan or credit card accounts, payment track of those debts, any delay or default in past. The better is your Credit Score, the more benefits you will enjoy with power to negotiate for lowest interest rate on loans.

This way CIBIL report help us to stay on track with debts, loans and credit cards and you must avoid any type of default if you are planning for any type of loan or credit card in future. You should always try to keep  your CIBIL/Credit Score high as much as you can. Normally, it takes about 18 to 36 months to achieve good Credit Score.

Loan approval process of banks, what do they broadly check?

  1. CIBIL Score (CIR) Report: It is most important document for loan approval. A good credit score and report is a positive indicator of your financial or credit health.
  2. Income or employment Status: Apart from a good credit history, lenders also check for regular, steady and secure income and employment status.
  3. Credit Details: Current and past credit facility/loan status and any legal suit/court case filed cases are also examined by the banks/lenders.
  4. Re-payment history: Banks also check for past payment track, any default on payments or amount overdue cases, which may create negative impact on loan approval.
  5. Paying capacity of loan EMI to Income Ratio: Banks also consider the proportion of your existing loans when compared to current income sources at the time of loan application. Chances of loan approval gets reduced if total EMI’s exceed current income ratio by 50%.

What is a CIBIL Report?

A CIBIL report is also called as CIR (credit information report) which is unified PAN based document that provides a detailed overview of credit history across different lenders over a significant period of time. This is a comprehensive report that provides details of person or entity’s borrowing history and repayment track record. The credit report includes the following information:

  • Basic details of an applicant (PAN, name, age, gender and address)
  • Employment or business details and incomes details
  • Number of enquiries made by banks or other lenders on receipt of the loan/credit card application
  • Data & information of previous and current loans along with the payment record
  • Any defaults on loan or credit card etc.
  • The details of fully closed or settled loans, if any
  • Total credit limit and the amount spent monthly (Credit Utilization Ratio)
  • Credit Score (ranging from 300 to 900)

How to get CIBIL Report or how CIR is generated?

CIBIL report is available on the official website https://www.cibil.com

Please visit this official website for more details for getting the CIBIL report

Anyone who want to access CIBIL report can register with your Income Tax PAN number on this official website of CIBIL. The process is very easy and user friendly. There are various subscription plans also available on this website. You may choose any of them or you can apply for your CIBIL report by paying their fee as applicable at the time of submission your request on this website. This report is normally sent to your registered email ID.

Secondly you can also request your bank or lender to provide CIBIL report because they also have access to CIBIL website and this way you can save cost of getting CIBIL report directly from website.

How Credit/CIBIL Score is calculated?

Banks, financial institutions and other lenders send reports on monthly basis related to credit activity of their customers to CIBIL bureau. This mainly includes data of each loan or credit card repayment made by the customer during the period and any delay or non-payments, new loan applications, interest rates, credit limit on cards, the status of all loan accounts including ‘written-off’ or ‘settled’ or ‘closed’ etc.  

Then complex statistical analysis of all those data is done and the credit score is calculated. Credit score is 3-digit numeric number ranging from 300 to 900 which is mentioned on the CIBIL report of person or entity. Timely credit payments normally lead to a good credit score.

What is range or slab of different CIBIL Scores?

Range of CIBIL/Credit scoreDetailed meaning of CIBIL/Credit score
750 and above (750 to 900)This is range of excellent score which reflects that the borrower or applicant is regular and consistent with loan repayments and credit card bills on time. They don’t hold any negative mark on their credit report. Chances of approvals are high for applicants with excellent score falling in this range.
700 to 750This is generally a good score and indicates better chances of loan application approvals as it indicates the borrower is financially responsible.
650 to 700This score indicates average performance means applicant have performed neither too bad nor too good while handling varied loans and credit cards. Generally, lenders consider risk with such cases and usually those loan application gets rejected. Even if the loan is approved, high interest rates are charged on such loans etc.
NA/NHIn case if an individual doesn’t own a credit card and have never taken a loan, the credit report displays NA/NH that you have No Activity or No History. The term implies that person having no credit exposure.
WRITTEN OFF/SETTLED STATUSIf the status of the borrower’s account is mentioned as written off or settled status, it means that the borrower had failed to pay the outstanding instalments for more than 180 days and as a result, the lender has written off the outstanding dues
DAYS PAST DUEThis means Days Past Due (DPD). This shows the number of days by which a scheduled payment was delayed for the account. If the account shows 000, this means there is no late payments for the account.

Which factors affect CIBIL Score the most?

This is most commonly asked question that “which factors affect CIBIL Score”. Here are few points explained in below:-

  1. Past credit history: Approximately 30% of CIBIL score depends on repayment history/track and timely payment of all dues. Persons not having any kind of credit history will have a zero CIBIL score. In those cases, usually banks/lenders also look at other factors such as  annual income and business/employment stability to judge repayment capacity of new loan EMI etc.
  2. Delay or default of EMIs, credit card payments: It is very important to honor payments of monthly EMI and credit card bills on regular basis with strong financial discipline. Any default or delay in those payments will definitely affect CIBIL score.

    If it happens repeatedly, it will shown in the credit report as pattern which will be terrible  and it will not be possible for getting new loans, credit line or credit cards in near future whatever be your networth in society.
  3. Utilization of Credit facility limits: Every person is eligible to a certain amount of credit limit  from banks/financial institutions based on creditworthiness and other factors like income and stability. This is reflected as a Credit Limit of borrower.

    Interesting thing is how much you utilize this credit limit also affects your future credit score. If credit limits are utilized at optimal level or in full every month on regular basis then it may lower the CIBIL score because it gives lenders a sense about  poor financial management of your business.
  4. Using  full Credit Card Limit frequently: Frequently using existing credit card limit and asking to increase that limit can create doubts about your credit-worthiness. This can negatively affect your CIBIL score. So, it is better to stay well within the existing credit limit and repay dues on time. It is recommended not to use beyond 70% of your credit card limit.
  5. Multiple and frequent loan applications: If any person is applying for loan or credit lines frequently and going to  multiple banks/lenders then chances are high for negative impact on CIBIL score.

How can I improve my CIBIL Score?

CIBIL Score can be improved by maintaining a good credit history, which is essential factor for loan approvals by banks and every other lenders. Below points will help you to do better your score:

  • Always be regular on  paying  your loan EMIs, credit card dues on to avoid negative report in CIBIL report.
  • Avoid optimal utilization of loan credit limit or credit card. Always try not to use too much credit, keep control on your credit limit utilization.
  • Avoid taking loan for everything and so frequently. It is always better to have a healthy credit portfolio with banks. Too many or too much loans/debts  may be taken as negatively in CIBIL report.
  • Avoid applying for multiple credit cards if you don’t want to reflect that you are continuously seeking excessive credit. Please apply for new credit cards cautiously.
  • Keep eye on your CIBIL report on regular basis as this will help you to notice any mistake, error or wrong information in CIBIL Score and Report. This is important to avoid unpleasant surprises. There are lots of cases where loan application got rejected despite of wrong data captured in CIBIL reports.

What are the benefits of having high CIBIL Score?

Since all loans and credit facilities such as a credit card are approved/sanctioned on the basis of thorough checking of CIBIL reports. CIBIL score is considered as one of the most important factors. Banks and lenders evaluate financial credibility and capacity for repayment based on CIBIL Score.

Therefore, good CIBIL score not only helps the applicant to get an approval on priority but also provide benefits of the quality of credit limits available. High credit score makes a person eligible for better deals on loans and credit cards. Here are some of major benefits: –

  • High chances of fast & bigger loan approval: A higher Credit Score reflects that lenders will be more comfortable in lending bigger amount of loan and providing you better credit limit on fast track approval.
  • Pre-approved loan and credit card offers: You can enjoy various pre-approved loan offers such as home loans, personal loans, top-up loans, car loans and credit card offers from your banks. They may bother you time to time by sending SMS and phone calls.
  • Easy access to high value Credit Cards: Premium and high value variant Credit Cards provides great benefits as compared to normal credit cards. Mostly these cards are issued to good CIBIL Score applicants.
  • Better rate of interest:  This is the most valuable benefit for having high credit score that you can get better rate of interest and negotiation power as compared to others. Those having a positive payment history and a high credit score are more likely to get a lower rate on loans.

What if I notice a mistake in my CIBIL report?

If you notice any mistake or any unwanted data that doesn’t relate to your financial transactions, then you should immediately report the same in writing to your bank or lender institution through whom that error or mistake was reported to CIBIL. 

If they do not take action on the same on time or if they don’t consider it seriously then you can also raise a dispute against that wrong entry through online dispute form available on official website of CIBIL i.e. https://www.cibil.com

However, it is always better to get that mistake rectified through the concerned/dealing bank or lender so that next time you get your error free CIBIL report automatically.

How do I raise a dispute? How much time it takes to resolve the dispute?

To initiate a dispute, you just follow the process as mentioned for filing online form online on CIBIL website. Please note that you can dispute multiple fields and information on your report in a single dispute by navigating to each section on the Online Dispute Form. Once the dispute is submitted, CIBIL will also mark the relevant field/ account/ section on your credit report as “Under Dispute”.

It normally take 30 days to resolve a dispute subject to the time taken by the concerned bank/lender or Credit Institution to respond to CIBIL on such disputes raised by you.

We hope that you find this article useful. Please share your thoughts in comment section.

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What is Credit Card? what is difference between Credit and Debit Card ?


RK Dhiman


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