CIBIL Score: Overview
The CIBIL score plays an important role in the loan approval process. A CIBIL score is a three-digit numeric summary (300 to 900) of your credit history.
Availing of a loan can help you meet financial requirements, such as a Loan Against Property for business expansion or a Home Loan to purchase a residential property, with ease. However, securing the best loan option depends largely on your creditworthiness. A strong CIBIL score not only increases your chances of loan approval but also helps you secure a better interest rate.
What is a Good CIBIL Score?
A credit score above 750 is usually considered a good CIBIL score, however, it may vary based on the credit agency and the lender. The definition and range of a good score may vary slightly between agencies. In India, four credit rating agencies are authorised to assess credit-related information. Out of these, CIBIL is a preferred credit bureau for CIBIL scores and reports.
Importance of a Good Credit Score
When evaluating your loan application, your credit score is assessed. A good credit score can ensure favourable interest rates, quick approvals, and higher loan sanctions. The following table shows various ranges of credit scores and what they imply:
| Credit Score | Rating |
|---|---|
| 900 to 800 | Excellent |
| 800 to 750 | Very Good |
| 750 to 625 | Fair |
| 625 and below | Low |
6 Effective Ways to Maintain a Good CIBIL Score
Here is how you can maintain a good credit score:
Accurate Credit Details
If you already have a credit card or a loan, you should check your credit report to make sure that all the details are reflected accurately. Any inaccurate information in your credit history can affect your credit score negatively, which is a key factor for loan evaluation. In case of inaccuracies, feel free to rectify your credit report by visiting the official website of the bureau.
Timely EMI Payments
One of the many ways to make sure you pay your debts on time is by setting up reminders. You can schedule automatic payments or set calendar alerts. This can help you avoid missed payments or incur late fees.
Avoid Reaching Your Credit Limit
Exhausting your credit limit can increase your credit utilisation ratio, which can negatively impact your CIBIL score. To maintain a good credit score, it is advisable to keep your credit utilisation ratio below 30% of your total credit limit.
Maintain Older Credit Accounts
Maintaining older credit accounts is essential for building a strong credit history and improving your credit score. The length of your credit history plays a significant role in your CIBIL score, as it reflects your financial behaviour over time. Instead of closing long-standing accounts, consider keeping them in your report.
Refrain from Multiple or Frequent Enquiries
Applying for several loans at the same time can lower your credit score. Each time you apply for a loan, your credit score is evaluated. When a lender evaluates your credit score, it gets registered as a hard enquiry. Several hard enquiries can reduce your credit score and reflect you as over-reliant on credit.
Ensure a Credit Mix
To keep a good credit score, it is important to have a balanced mix of credit. This means having different types of credit such as secured and unsecured loans. A diverse credit portfolio demonstrates your ability to manage various forms of credit responsibly, which can positively impact your CIBIL score.
How to Improve Your Credit Score?
Are you worried about a low credit score harming your loan eligibility? Follow these tips below to improve your credit score:
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Check your credit report regularly
Develop a habit of checking your credit reports regularly. It will help you identify errors easily. Once identified, take steps to correct your credit report. You can easily check your credit reports from the credit bureaus once every year for free by following the instructions mentioned on their website.
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Reduce your credit utilisation
The measure of how much of the available credit you are using is referred to as credit utilisation. Try to utilise 30% or even less of your overall sanctioned credit limit.
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Pay your bills on time
Delayed and missed repayments are the most common reasons behind low credit scores. So, make sure you repay all your bills well in time.
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Consider using a secured card
Use a secured card to build a credit history if you have a low credit score. Consider choosing a secured card that reports to most of the credit bureaus. It will make it easier for your good repayment behaviour to improve your credit standing.
Benefits of a Good Credit Score
- Competitive Interest Rates: A good CIBIL score can lead to a more competitive interest rate on a Home Loan, reducing the overall cost of borrowing.
- Higher Chances of Loan Approval: A high credit score can increase your chances of being approved for a loan quickly.
- Higher Loan Amounts: With a good credit score, you stand a chance to secure a sizeable loan amount.
How to Check CIBIL Score?
To check your CIBIL score online, visit the official website of CIBIL and follow these steps:
- Click on ‘Check Your CIBIL Score.’
- Choose a subscription plan.
- Set up a secure login credentials.
- Provide your PAN and ID details for verification.
- Complete the payment process and verify your identity using OTP or email authentication.
- Enter your personal details to access your credit score.
A good CIBIL score increases your chances of loan approval and can help you secure a better interest rate. Maintain it by paying EMIs on time, avoiding high credit utilisation, keeping old accounts, and having a credit mix.
*Terms and conditions apply.
Good CIBIL Score: FAQs
Yes, although a score of 750 and above is usually considered good, the score of 700 to 750 is also considered not bad by many lenders. However, it is best to have a score above 750 to find better deals at lower interest rates.
The definition and range of a good credit score is universal and not particularly related to the borrower’s age. Which means, any score above 750 is a good credit score at any age. However, it is expected that as the age advances, the credit score is maintained at the higher end of the credit score spectrum.
Reaching and maintaining a high credit score of 850 requires you to undertake measures such as diligently paying your EMIs on time without missing any of them, maintaining credit ratio of less than 30% on revolving credits, and seeking out new credits only when necessary. It also requires you to have a good credit mix of secure and unsecure credits, retaining your old credit accounts and avoiding hard enquiries on your account.
In general, depending on what score you are at right now, what have been your past defaults and how well you manage your finances from hereon, it could take anywhere from as low as a month to as much as 5 years or even more to see changes in your credit score. Note that it is an organic process that requires a little patience.
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