What is the meaning of the CIBIL Score?

Your CIBIL score represents your credit repayment behavior and reflects your credit wellbeing. It is determined by various factors like credit history, timeliness of loan and credit card charge repayments, existing loan applications and rejections, recurrence of loan applications, and various factors. The three-digit number gives lenders a thought of your creditworthiness and your credit monetary stability, which determines your ability to reimburse debts on schedule. This helps them assess the risks engaged with offering loans and credit cards to borrowers, evaluate the chances of recovery of debts and settle on whether to approve loan and credit card applications. 

A CIBIL Score is a consumer’s credit score. Simply put, this is a three-digit numeric summary of a consumer’s credit history and an impression of the person’s credit profile. The Score is based on details found in the ‘Accounts’ and ‘Enquiries’ sections of the CIBIL Report, including (yet not restricted to) loan accounts or credit cards, installment statuses, outstanding amounts, and days past the due date. Going from 300 to 900, the closer a CIBIL Score is to 900, the higher are the chances of the consumer’s credit card or loan application getting approved. 

A person’s past behavior is taken as a pointer of his/her future actions, and, following that, the CIBIL Score showcases a consumer’s creditworthiness. For instance, when a person applies for a credit card or loan, one of the important factors that lenders check the CIBIL score to ensure the repayment ability of the borrower. 

Factors that impact CIBIL Score:

The CIBIL Score is generated by a scoring algorithm, which considers an enormous number of information points and large-scale level credit trends. This algorithm is based on  36 months of credit history. Fundamentally, four key factors impact a consumer’s CIBIL Score – installment history, credit blend of secured or unsecured loans, inquiries, and credit usage. 

However, the latest CIBIL Score algorithm also includes the profundity of credit (that is, the span of your existing credit history from when your oldest credit account was opened), long haul pattern of outstanding balances, transaction history on credit cards, the proportion of genuine repayment add up to aggregate sum due and new accounts opened/accounts closed. 

For what reason is your CIBIL score important? 

Your score is a snapshot of your credit wellbeing. It gives lenders thought of your ability to reimburse the acquired sum. 

  • Know your Credit Status: 

When you check your score and report, it tells you where you stand and what you need to focus on. Your CIBIL report shows a summary of your present and past credit transactions. Checking your report consistently also helps report and amend any discrepancies that have lowered your score through no fault of your own. 

  • It makes you Eligible for Loans 

For the most part, monetary institutions and loaning platforms consider a CIBIL score of 750 or more as ideal. Subsequently, it is important to fabricate credit history and get a score to make you better eligible to apply for credit under extraordinary terms. If you have no credit history and no score, it becomes hard for lenders to assess your creditworthiness. 

A low score does not just minimize your chances of loan and credit card qualification, yet loans are offered at a weighty pace of interest or on a low loan sum and other troublesome terms and conditions. Then again, a decent CIBIL score enables speedy loan approvals and different benefits.