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CIBIL score is a numeric expression of your credit history. The score is derived by TransUnion CIBIL based on the past credit transactions mentioned in your CIBIL Report. It is made up of three digits, ranging from 300 to 900, with 300 being the lowest and 900 the highest.
CIBIL scores have a significant role in the loan application process. Banks and other financial institutions look into the scores of potential borrowers to determine whether or not they are eligible for loans, credit cards, overdraft facilities, etc. It has been observed that financial institutions are more willing to lend to those individuals holding a CIBIL score of 750 and above.
The banking regulator has made it mandatory for all credit information companies in the country to provide one free credit report once in a calendar year, on request.
To view your free CIBIL score and report, here are the steps you need to take:
Step 1 - Visit TransUnion CIBIL’s official website and click on the link for free credit report.
Step 2 - Create your CIBIL account by entering your name, email address, telephone number, etc.
Step 3 - Fill out a form with the following details for identity verification: date of birth, gender, postal address and identity proof number (PAN, Aadhaar, etc.)
Step 4 - Once you are done, accept the terms and conditions. CIBIL will show your credit information report, which contains your credit score.
CIBIL score is the first impression a lender has of you, the potential borrower. If you manage your finances well and pay back the money you've borrowed from credit institutions in a timely fashion, you will have a good CIBIL score. If you are negligent with your finances, your credit score will take a dip, thus making it difficult to avail loans or credit cards from banks and other financial institutions.
Before applying for a loan, it is advisable to get a hold of your CIBIL report, so that you can check your score and be forewarned if there are any issues in your credit history. Doing so in advance gives you enough time to work on building up your CIBIL score. In general, it is a good practice to check your CIBIL score periodically, possibly every year, so that you stay updated about your credit health and avoid any unpleasant surprise(s) when you actually do apply for credit.
By regularly checking your CIBIL report, you will also be quick to spot discrepancies, if any, that may have crept in. Errors pertaining to your payments or applications can have a serious impact on your CIBIL score. Hence, to ensure your report is free of it, you need to go through your credit report on a periodic basis. Should you disagree with anything listed in there, you can raise a CIBIL dispute and get it resolved.
Your CIBIL score plays a significant role in deciding whether or not you will be granted a loan or credit card. Since lenders assess your creditworthiness based on your CIBIL score, it become necessary that you are fully aware about where your three digits stand at all times. Some of the factors that can push up or pull down your CIBIL score are:
Repayment History –Repayment history accounts for up to 30% of your score, thus making it one of the most important factors affecting your creditworthiness. If you have always ensured timely repayments, it will reflect positively on your credit report and score. On the other hand, missed or late payments can drop your score down and tarnish your credit image.
Credit utilization rate – This shows the balances owed on your credit card as compared to the cards' credit limits. A high credit utilization rate is bad news as it indicates an increase in the debt burden. If your credit utilization rate goes down, it shows that your repayment burden is reducing, which in turn will help boost your credit score.
Credit applications – When a person is seeking credit, he or she might apply to various banks and other financial institutions at the same time. This, however, is not a wise move since 'hard' enquires are recorded in your CIBIL report and bring down your score. Lenders tend to exercise caution with respect to people who have too many enquires against their name since it could mean that the individual’s debt burden has increased and there is a possibility he or she might not be able to honour timely repayment.
Credit mix – Maintaining a healthy mix of credit, one where the proportion of secured credit like home loans and auto loans is higher when compared to unsecured loans will be more favourable for your CIBIL score. If your basket only contains unsecured credit, lenders might treat your application with caution. A critical point to be noted is that whatever kind of credit you avail, make sure that you pay it off in full before or by the due date.
Negative marks – A negative mark on the CIBIL report could reflect one of many things – ‘Written Off’ or ‘Settled’ status on a loan, foreclosure, accounts in collections due to defaults in payments, etc. Having too many negative marks could easily tarnish your CIBIL score and restrict your eligibility for a loan. To lenders, a negative mark means that you've not been able to manage your credit. Clearing a negative mark from your credit history can take years.
Since CIBIL score is a highly valued number, reflecting your creditworthiness, it becomes essential to always maintain a good rating. If you feel like your score might be in trouble, here are the measures you need to take to raise it:
Ensure timely payments of bills - Making sure that your loans are repaid on time and credit card bills are settled before or by the due date is the first step you need to take to build your CIBIL score. Always be prompt in paying off your bills, so that your report does not show any payments as pending or missed, which can severely damage your creditworthiness.
Credit Utilization- If you have opted for a credit card, keep in mind the credit utilization ratio. This ratio draws a comparison between the amount of credit you are using to the amount of credit you have available. It is always beneficial to maintain a low credit utilization rate, even when you have increased your credit limits.
Keeping old accounts open- When you're trying to build your CIBIL score, you may be tempted to cut up old credit cards that are no longer in use and close the accounts. Refrain from doing this as a well-managed credit card account held for a long period will show lenders that you are responsible with your finances. Additionally, it will help lower your credit utilization rate, which in turn will boost your CIBIL score.
Credit mix- The kinds of credit that your portfolio contains will have an impact on your credit score. If the weightage of unsecured credit like personal loans and credit cards is higher, it will not reflect well on your credit profile and lenders will be cautious in extending funds to you. It is advisable to hold 70%-80% in secured credit like home loans and auto loans and the remaining in unsecured.
Limit ‘hard’ inquiries - Every time you apply for a credit card or loan, the financial institution will run a ‘hard’ inquiry on your CIBIL report. Hard inquiries are made by lenders when they want to view the applicant's entire credit information report to assess their eligibility for credit. Such inquiries are recorded on your CIBIL report and too many of such inquiries will drag down your score. To keep this from happening, apply for only such credit that you feel certain will get approved.
How to get free CIBIL score online?
To view your free CIBIL score, here are the steps you need to take:
Will opting for a credit card bring down my CIBIL rating?
If you manage to pay your bills on time and in full, it will reflect well on your credit profile and keep your utilization rate low. On the other hand, if you delay payments or miss a few, your credit score will take a beating.
How to improve CIBIL score?
To build up your credit rating, here are the steps you need to take:
How often should I check my CIBIL score?
It is a good practice to check your CIBIL score and report at least once every year, so that you stay updated about what’s in your report. This will help you quickly spot any errors that may have crept in and keep you updated about your financial status at all times.
How to check CIBIL score using PAN card?
To check CIBIL score using PAN, the following steps need to be followed:
Once all the above-mentioned steps are taken care of, the individual will be able to view his or her CIBIL score.