Do you know:
- All Banks and Financial Institutions check your Credit Score before approving any loan to you?
- Higher your Credit Score, higher are the chances of loan approval?
- 90% of new loans sanctioned are to individuals with a credit score of 700 and higher?
- How to check CIBIL Score (Credit Score)?
Well more than 95% of people do not know the importance of credit health and credit score. If you understand your credit score and have a healthy credit history, you can save thousands and lakhs of rupees. Not to worry, because now you will be part of the better informed 5%. In this guide, you will learn about all aspects of credit score (CIBIL score).
What is Credit Score or Credit Rating?
A Credit Score or Credit Rating, computed by an approved credit rating agency, is a 3-digit number which indicates an individual’s financial & credit health. The score is derived from the individual’s credit history and ranges from 300 to 900 points. The credit score gives an indication to the lender about the likelihood of individual paying back loan or credit card dues based on his past repayment behavior.
Who issues a credit score or credit rating?
Credit Information Bureau India Ltd (CIBIL) is India’s premier credit rating agency that provides credit score, known as CIBIL score. Experian and Equifax are other large credit rating agencies operating in India.
In this guide we will focus on CIBIL and CIBIL Score. Process of Experian and Equifax is also similar.
What is a good CIBIL score?
The CIBIL score ranges from 300 to 900. The closer your score is to 900, the better are the chances of your loan getting approved. Anything above 750 is considered a good credit score.
Although a good credit score is an essential requirement, it does not guarantee loan approval. Lenders will look at other factors also like your income to obligation ratio, company profile, your previous loans and repayment history etc.
How is CIBIL score calculated?
CIBIL score is calculated based on a complex formula which depends on five major factors. Understanding these factors and their weightings will help you in maintaining/ improving your score.
- Repayment History (35%) – To maintain a good repayment history, you should pay all your loan EMIs and credit card dues on time. Even a single default has a negative impact.
- Credit Utilization (30%) – Credit utilization ratio is the ratio of total credit (liabilities) that you owe to your total credit (loan) limit. A very high credit utilization ratio is considered risky and has a negative impact on credit score.
- Duration of Credit Servicing (15%) – The amount of time for which you have servicing credit (loan) also has an impact on your credit score. If you have been making timely payments for your loans/ credit cards for a longer period of time, it will increase your credit score.
- Credit Mix (10%) – A better credit mix i.e. your credit (liabilities) spread across credit cards, auto loan, personal loan, home loan etc. also helps in improving your credit score.
- Number of Credit Inquiries (10%) – Whenever you apply for a loan or a credit card, the lender will run an inquiry on your CIBIL report. More number of inquiries indicate that you are credit hungry which is not a good sign for your credit health. Hence, higher number of credit inquiries have a negative bearing on your credit score.
How to check CIBIL Score online?
Check out this step-by-step video tutorial on how to check your cibil score online, or follow instructions below:
Youtube Link – How to check CIBIL Score?
Step-by-Step instructions – “How to check CIBIL Score?”
- Go to CIBIL website, www.cibil.com.
- Click on “Buy Your Credit Score” link on home page. You will be directed to Online Credit Score Request Form.
- Fill your details and complete the form.
- Click on “Online Payment” button at the end of the form and make online payment.
- Then you will be asked 3-5 questions about your Loans & Credit Cards to validate your account. Answer these questions.
- (a) If authentication is successful, you can instantly access your credit score and Credit Information Report (CIR). This will also be emailed to you separately.
(b) If the authentication is not successful, you will have to complete KYC details on https://www.cibil.com/kyc-document-upload/ and upload the following documents:
- Payment Confirmation Form
- Self-Attested Identity Proof
- Self-Attested Address Proof
Then CIBIL, after verifying your documents, will send your CIBIL Score and Credit Report to your residence address via Express Delivery.
For more details on documents needed for authentication, you can visit https://www.cibil.com/kyc-document-checklist .
Once, you have your CIBIL Score, you can analyze your score. If your score is more than 700, you can safely apply for a loan. If, however, your score is less than 700, you should take immediate steps to improve your score. You should clear all your dues that are reflected in your credit information report immediately.
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