What is CIBIL Score and how to maintain good CIBIL Score
Today we all seek loans for different purposes, be it a home loan or consumer loan. We are living in era of credit wherein
taking loans even for luxury items is a very common thing. There is anxiety
when we apply for loans, due the fear of outright rejection of application or reduction
in loan amount offered. The anxiety is also there since our dream home or dream
car heavily depend on the borrowed amount. The most important factor for sanctioning
a loan (apart from income of course 😃)
is “Credit Worthiness” of the borrower. And this credit worthiness depends on a
3 digit number which is known as CIBIL score.
There are several factors like 1) Income levels, 2) assets
of the borrower(s) like FDs / other investments, 3) past performance of credit
history (if applying with same lender), that play part in lenders decision. However
there is no fixed matrix that a borrower can know beforehand while applying for
loan. One thing which is common for all loans and lenders is the CIBIL score.
CIBIL score is integral part of all lending decisions. So it’s important to know
more about your score
What is a
CIBIL Score?
CIBIL score is simple words is summary of your credit
history. The CIBIL score ranges from 300 to 900. A score greater than 750 is
desirable for banks and a score less than that we lead to more enquiry from
banks or even rejection of loan application.
How to improve
CIBIL Score?
CIBIL Score can be improved by maintaining a good
credit history. Follow these steps which will help you in improving your score:
A) Pay your dues on time; always
This is most important factor that lenders will use
to judge the borrower. If a borrower has had history of late payments with existing
loans payments, then he may do the same with new loans (now that he has more loans
to repay). This factor is viewed very closely by banks.
This payment behavior is shown under the tab Days Past Due or DPD in
your Credit Information Report (CIR) for every loan or even for credit
card availed. It simply shows how late payment of an account is made.
Below are the types of asset classification that can appear in the DPD
section:
Source : CIBIL
A mention of ‘doubtful’
or ‘loss’ account will make loan sanction difficult for your or even result in
outright rejection.
B) Apply for new credit only if required
Apply for new credit cautiously and when needed only.
Continuously seeking of excessive credit will reflect badly under your name and
may hurt when credit is actually required
C) Maintain a healthy mix
There are two types of loan, one secured like home
loan and another unsecured like personal loan. Maintain a healthy mix for these
two types. Higher proportion of unsecured loan will be viewed negatively.
D) Monitor your joint accounts and guarantee accounts
regularly:
If you have given guaranteed for a loan and if that
loan turns bad, then you are held liable for missed payments. Similarly joint
holder's missed payment could affect your own credit rating. So while giving
guarantee for a loan for a friend or relative, make inquiry on that person’s
credit history/pattern of repayment.
E) Review you credit history one in a year
Source : CIBIL
You can check your CIBIL score readily by login into CIBIL
website. This facility is available for all free of cost. You will be
redirected to a dashboard which illustrates where you stand on the basis of your CIBIL
Score in comparison to other consumers (for whom a CIBIL Score is available).
For example, if your score is 500, you are among bottom 19% of consumers who
have a CIBIL Score in the range of 300 and 699. When you stand as a guarantor for
a loan, you can ask the borrower to share this information with you.
About Us
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