CIBIL Score
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CIBIL Score Guide - Important Information You Must Know.

Whenever a person applies for any kind of loan from a bank or any financial institute, first of all he is asked about the CIBIL score. On the basis of CIBIL score, it is decided whether the bank loan application will be approved or not. If the CIBIL score is good, the loan amount is also higher and the interest rate is also less. You must have seen many times that the maximum loan amount limit is also different for individuals taking the same salary. The interest rate also varies because of the CIBIL score. In today's post, we will explain in detail about the CIBIL score, how it affects the financial situation of an individual.

What is CIBIL Score?

CIBIL Score is a credit scoring system that shows the credit history of an individual. The CIBIL score is a numbering system that ranges between 300 - 900. 300 is the lowest credit score and 900 is the maximum credit score. In which conditions the credit score is low and high, we will talk further in this post.

Because it is controlled by a company named Trans Union CIBIL Limited, hence it is called CIBIL Score. It is commonly called credit score. Apart from this company, there are 3 other companies in India that provide credit score service. Since CIBIL is the oldest company and most popular, hence the credit score came to be called as CIBIL score.

How does CIBIL score work?

Reserve Bank of India has given license to 4 companies for the service of Credit Score. Therefore, all these companies have information about each individual's loan, EMI, credit card and any other loan. Whenever an individual takes any type of loan or credit card from any bank or financial institution, it gets registered in the records of the credit score companies. Apart from this, the information of all EMI, credit card bills etc. is also registered in the records. Based on this information, these agencies issue credit scores. If a person has not taken any loan or credit card in the past, then his credit score is 0. Because there is no information about that person in the records of the credit score company. Whenever a person takes a credit card or loan for the first time, after about 6 months, the credit score of that person starts changing.

Why banks & NBFC check credit score?

Let us take a simple example to understand this. Many times you must have seen around you that whenever a person lends money to someone, he definitely checks borrower's background. He checks details of his financial condition, also checks whether he has refused to repay the borrowed money from anyone in the past. He lends money only when he feels that the money he is lending is safe. The same applies in the banking system. Banks collect the following information through credit score.

  • The past credit history of the applicant to know how many loans he has taken and whether EMI has been paid on time or not.
  • The current loan EMI so that it can be estimated whether the applicant will be able to pay the EMI of the new loan or not.
  • The new loan amount can be calculated based on the current EMI and balance loan.

Through the credit score, banks find out the loan and credit card history behind any person. Those who have a good credit score, banks give loans up to a high amount even with low interest because the risk in giving a loan to such a person is less. On the contrary, due to low credit score, banks do not approve the loan as there is a lot of risk in loan recovery. That's why it is very important to have a good credit score. The credit score is greatly affected by the loan and credit card taken.

Now the question comes that if someone has not taken a loan before, will his credit score be good? In such a situation the credit score is neutral i.e. 0. In such a situation, the bank gives a loan to the person on the basis of his in hand salary and he does not get the facility like high loan amount and concession in interest.

CIBIL Score Range

You already know that the range of CIBIL score ranges from 300 - 900. But it is also important to know that up to which range of credit score is considered good, which makes it easy to get a loan. For your convenience, a table is given below so that you can easily understand the range of CIBIL scores and which range is a good credit score.

CIBIL Score Credit Reputation Loan Approval Possibility
<600 Bad Low
600 - 649 Doubtful Hard
650 - 699 Fair Possible
700 - 749 Good High
750 - 900 Excellent Very High

What factors affect the CIBIL score?

  • The credit score is affected by the current income of the individual.
  • Current loan and credit card EMI
  • Loans paid in the past
  • Delay or default in loan repayment
  • Loan applications that have been rejected multiple times.

If you want to keep the CIBIL score excellent, then always keep the above points in mind. If you have not taken any loan or credit card till date, then your credit score will be neutral. In such a condition, you are given a loan on the basis of your salary. In which there is no concession in the interest rate. If you are planning to take a major loan in the near future, then check your CIBIL score in advance. If your CIBIL score is neutral, then you can also improve your credit score by taking a credit card. You can use the credit card for your daily expenses & your family expenses. But keep in mind that the credit card bill must be paid on time.

How to check credit score?

There are many ways to check credit score. Almost all banks provide this facility. You can check your credit score by visiting any bank's website and entering your PAN card number and personal details. Apart from this, you can also check the credit score by visiting the website of the agency providing the credit score service. Banks and agencies charge service fees for this service, which ranges from Rs 300 to Rs 500. If you apply for credit card or loan then in that case there is no charge for your CIBIL score.

CIBIL Score

This was the important information related to CIBIL score. A good CIBIL score enables you to not only meet your financial needs through loan but also save your money by availing a discount in the interest rate. A good CIBIL score also shows that you fulfill the duty of a responsible citizen by making timely loan repayments.

If you like the information, then definitely share it with other defense person.

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