- About Coverfox
Your CIBIL score represents your credit repayment behaviour and reflects your credit health. It is determined by various factors like credit history, timeliness of loan and credit card bill repayments, existing loan applications and rejections, frequency of loan applications, and various other factors. The three-digit number gives lenders an idea of your creditworthiness and your credit financial stability, which in turn determines your ability to repay debts on time. This helps them assess the risks involved in offering loans and credit cards to borrowers, evaluate the chances of retrieval of debts and decide on whether to approve loan and credit card applications. A low score not only minimises your chances of loan and credit card eligibility, but loans are offered on a heavy rate of interest or on a low loan amount, and other unfavourable terms and conditions. On the other hand, a good CIBIL score enables speedy loan approvals and other benefits.
TransUnion Credit Information Bureau India Ltd., or CIBIL in short, is India’s first credit rating agency, analyses your credit health. Your CIBIL score is determined through a complex statistical calculation based on the data about your credit history received from banks and financial institutions. This data also gets reflected in the CIR or Credit Information Report of every borrower. CIBIL is governed by Credit Information Companies (Regulation) Act, 2005 and has been authorised by the RBI (Reserve Bank of India). CIBIL scores are measured on a scale between 300 and 900, with 900 being the highest and 300 indicating the lowest. The minimum CIBIL score that a borrower usually needs for a quick loan approval process is 750.
Let’s have a look at good, bad and middling CIBIL scores and how they affect loan approvals.
Late payment of debts on loans and credit cards minimise your CIBIL scores, and that negatively affects your prospects of getting a loan or credit card. If you have a low CIBIL score and would like to enhance it further, here are some tips on how you can improve it:
I have a CIBIL score of 692. Will it be difficult for me to get a loan?
A CIBIL score between 650 and 699 is interpreted as an average credit score. It indicates that the borrower has neither been too good nor too bad with the repayment of their debts. You need to improve your credit behaviour to reduce the risk of loan rejections, the chances of which are quite high. The scope of getting a loan with favourable terms and conditions is restricted to a score in this range. This means that even if a borrower secures a loan, it will be offered at a high rate of interest, high premium and/or no additional benefits. You need to keep a close watch on your debt repayments and pay them within the stipulated date, so that your CIBIL score does not fall further.
What can be the reasons behind a low CIBIL score?
Can withdrawing cash against my credit card affect CIBIL score?
Yes, withdrawing cash against your credit card adversely affects your credit score. This is because it reflects on your poor credit health and financial constraints. This is done to caution future lenders about the risks of offering credit to such borrowers.
One of my loan EMIs has been repeated twice in my CIBIL report. Can this be the reason behind the sudden dip in my CIBIL score?
Yes, repetitions and omissions of transactions can be the reason behind a sudden dip in your CIBIL score. You can raise a CIBIL dispute to get it rectified. Make sure that you have it corrected before applying for a loan or credit card to be eligible for a lower interest rate that is aligned with your credit history and behaviour.
I often miss my loan repayments because I forget the due date? Is there any way in which I can stop my CIBIL score from getting affected because of this?
You can give standing instructions to your bank to activate the auto-debit facility that will deduct the outstanding amount from your account on a certain date. You have the freedom to decide on this date as per your convenience. However, ensure that you maintain sufficient balance in your registered account on the date to enable the bank to complete the auto-debit process successfully. If the auto-debit process remains incomplete due to the lack of sufficient balance in your account, your banks will charge a heavy fine on every unsuccessful auto-debit.