Before taking a loan, you must be aware of your CIBIL score. Your lender will examine it first, so let’s find out why it is crucial.
Multiple banks, NBFCs and several other financial institutions offer loans to people in addition to other financial instruments like credit cards. The financial institutions provide these loans if the applicant has a decent credit score. A decent CIBIL score increases your possibility of getting loans easily and at lower interest rates.
It is crucial to know why CIBIL score is important, and also that the CIBIL score gets evaluated relying on many factors such as a person’s payment history, outstanding debt, credit accounts and their types, duration of credit history, etc. After assessing the CIBIL score, it goes to banks and financial organizations for inspection.
In India, credit scores vary from 300 to 900. If your score is close to 900, the lending institution will have a substantial assurance of your capacity to repay the loan, giving you enough chance of getting your application approved. Generally, a score above 750 is considered a decent credit score.
What do you know about CIBIL score?
Credit Information Bureau of India Limited issues a CIBIL Score or Credit Score to an applicant, reflecting their creditworthiness and capacity to repay the loan on time.
CIBIL is a three-digit number evaluated based on the applicant’s financial history. CIBIL scores range between 300 to 900, and people with greater scores have a better probability of getting a loan approved. According to CIBIL’s analysis, most approved loans are for individuals with a score of 750 or above.
Your CIBIL score is inferred based on several factors such as your loan types, payment history, credit history, several loan accounts, opening and outstanding loan amount, etc. Distinct banks and financial institutions have different benchmarks for granting loans to applicants.
Steps to check your CIBIL score
To check your CIBIL score on any website, follow these steps:
Step 1: Visit any official financial website
Step 2: Enter the following personal information:
- Full name
- Mobile number
- Date of birth (DD-MM-YYYY format)
- Pin code
- PAN number
- Email address
Step 3: Enter the OTP sent to your number on the popup screen.
Step 4: Now give the website permission to receive your credit information from credit bureaus by ticking the box.
Step 5: Click on the “Get Credit Score”.
Step 6: Now, Your credit score is on the screen!
Significance of CIBIL score
Whenever a borrower applies for a credit card or loan at a bank, the lender first inspects the CIBIL or credit score to discern whether the candidate is loan-worthy or not. The lender will dismiss the application if the credit score does not meet the bank’s or financial institution’s expectations.
But, if your CIBIL score is higher, in this case, the lender will assign the application and take it forward for evaluation of other aspects before the ultimate approval of the loan.
Researchers explain why CIBIL score is important as it assists both the lender and the borrower in the following ways:
- CIBIL Score helps the borrower in knowing his credit status. Someone who oversees his finances well will constantly have a higher CIBIL score. A lower CIBIL score means the applicant has bad credit, and banks do not extend loans to such applicants.
- If a person has a very favourable CIBIL score, he can get a loan at a considerably lower interest rate and with minimal paperwork. If a candidate’s CIBIL score is very low, banks will either not ratify their loan application or provide them with a loan at a higher interest rate.
However, the CIBIL score alone is not the only criterion that agrees on whether banks will award a loan to an applicant or not.
Several other factors help these organizations to authorize an applicant’s loan application. But applicant’s CIBIL score plays a significant role when banks offer interest rates. An applicant with an impressive CIBIL score can get a loan at a lower interest rate, while an applicant with a lower CIBIL score can obtain a loan at a higher interest rate.
Advantages of CIBIL score
A good CIBIL score assures you various advantages over those with no or lower CIBIL scores. If you have a significant CIBIL score, you are capable of the following benefits:
Easy credit from lenders: A good CIBIL score helps you quickly get loans and credit from lenders. Your good credit score increases the expectation of lenders that you will effortlessly pay back your loans within the time limit.
Fast loan approval: A decent CIBIL score implies that you are a good prospect for borrowing money. Banks, therefore, try to give you a loan as soon as possible. People with lower credit scores must submit several documents and disclose a guarantor, so the loan disbursement proof takes a little time.
Low-interest rate loans: People with high CIBIL scores get loans at a lower interest rate. Those with lower credit scores are given loans and credit at higher interest rates.
More bargaining power: If you recognize your CIBIL score is very high, you have the bargaining power to lower your interest rate.
Higher approval limits: An excellent CIBIL score will help you get loans with a lower interest rate and an opportunity to get higher loan maxima.
Easy clearance for leased properties: People with good credit scores get approval for loans, even for leased/rented properties like houses, commercial complexes or apartments.
The exciting credit card offers: People with good CIBIL scores get exciting credit card offers from all banks. These cards have higher limits, more privileges and amazing offers and cashbacks
Does the CIBIL score matter?
CIBIL Score is significant in the Indian financial system, where almost all banks and NBFCs rely on it to approve and disburse loans. Your financial life depends greatly on your CIBIL score, and now you must understand why CIBIL score is important.
No matter how sharply you have planned your finances, a financial emergency can emerge anytime, and you may require applying for loans. That is when the CIBIL score will matter a lot. Below are the facets that are affected by your CIBIL score:
Loan approval – Banks and NBFCs approve loans based on your credit score. A higher CIBIL score will boost your chances of getting approved quickly.
The interest rate offered – The interest rate offered by the bank may be lower for those with high CIBIL scores.
Types of credit – People with higher credit scores get a wide variety of credit card offers from companies which do not get offered to people with lower credit scores.
Why do you need a CIBIL score?
Eligibility for accessing a credit card or loan is substantiated based on CIBIL score analysis. For individuals, credit or CIBIL score can influence their financial journey, which requires it to be carefully comprehended and managed. Here are some of the significant aspects affected by your CIBIL score.
A decent CIBIL score will enable you to get the best interest rates. It is seen that the higher your credit score is, the better interest rate you will be offered.
CIBIL score is one of the primary aspects considered for loan approval from a bank or financial institution. The role of CIBIL in bank financing emphasized by the lender analyzes the candidate’s reliability before granting the loan. If you have a poor or bad CIBIL score, it will curtail your probability of getting credit without much trouble. In contrast, a good CIBIL score is a must for accessing a credit card, home loan, personal loan, car loan, mortgage loan, etc.
A decent credit score is a favourable factor for you to avail yourself of a new home loan. A decent CIBIL score acts as a determining factor in this case.
CIBIL score is known to increase your ability to get favourable loans, but it is also useful in getting approval for various plans like lower insurance premiums.
You must be wondering why CIBIL score is important, but you need to know it is the first step toward getting your loan. A person’s credit history is essential for various banking functions. In India, most people usually know the term “CIBIL Score” but do not have the exact knowledge related to its origin and existence.
CIBIL’s functions focus on analyzing consumer borrowing and payment information for credit risk assessment and credit pricing.
The CIBIL score’s utility is connected to credit access, exclusively to credit sanctions. Various banks in the country check the CIBIL score, with CIBIL acting as the primary medium to help determine the creditworthiness of a person, which proves beneficial for them to get loans easier and faster.
Your CIBIL score is essentially your first impression to lenders. The higher the score, the better your chances of getting approved for a loan/credit card.
What is the perfect CIBIL score you should have?
The perfect CIBIL score for granting loans or credit usually lies between 700 and 900. A significant score ensures a higher chance of getting your loan application approved, and a score above 750 is favourable if you want to use a personal loan, home loan, car loan or credit card.
What are the expenses for checking CIBIL scores through CIBIL?
CIBIL scores and reports are provided yearly without any costs, and you might have to pay a considerable amount every time for monthly updates.
My CIBIL score is 580. Is there any chance that my CIBIL score will improve?
Yes, you can enhance your CIBIL score by keeping the following things in mind:
- Pay your dues on time
- Keep your credit utilization rate low
- Maintaining a healthy credit mix
- Check your credit report regularly
- Keep your old accounts open
Can I download a credit report online?
Yes, you can download credit reports for free every month, and this choice is available online for a lifetime.
How is the CIBIL score computed?
CIBIL score is computed after considering several factors like repayment history, credit utilization ratio, multiple enquiries, and credit mix.