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Thinking about taking a loan? Want quick approval and hassle-free processing? Searching for a loan with a lower interest rate? Then, ensuring a good CIBIL score is key. You might now be wondering—what exactly is CIBIL?
The Credit Information Bureau (India) Limited (CIBIL) is the most well-known among the four credit information companies licensed by the regulatory authority.
The other three approved credit bureaus are Experian, Equifax, and Highmark. Despite their presence, the CIBIL score remains the most widely used credit score in India.
CIBIL Limited manages credit records for approximately 600 million individuals and 32 million businesses. It operates under TransUnion, a global financial services company, which is why credit scores in India are often referred to as the CIBIL TransUnion score.
A CIBIL score is a three-digit number summarising your credit history, rating, and report, ranging from 300 to 900. The better CIBIL score is 900, but typically, having a credit score of 700 is good since it strengthens your creditworthiness.
The CIBIL score is key in the loan application process. When someone approaches a bank or financial institution for a loan, the lender checks the applicant’s CIBIL score and report.
A low CIBIL score reduces the chances of a loan application getting approved. And the higher your CIBIL score is, the better your chances of the loan being reviewed and granted. Simply put, the CIBIL score is a first impression for the lender to approve your loan.
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Any CIBIL score is determined based on four factors:
Your payment history plays the most significant role in determining your CIBIL score. Timely repayment of credit card bills and loan EMIs each month is crucial. According to a CIBIL analysis by the Financial Express, a 30-day delay in payment can lower your score by 100 points.
If you have multiple credit cards and loans, setting up reminders and alerts can help ensure you never miss or delay payments. Any overdue or missed payments negatively impact your score, indicating an inconsistency in credit repayment.
A key rule to follow is monitoring your credit utilisation ratio, which represents the credit you’ve used compared to your available limit. Experts recommend keeping this ratio below 30%. For instance, if your credit card limit is ₹1 lakh, your spending should ideally stay around ₹30,000.
Exceeding 50% of your limit can negatively impact your credit score. High credit usage signals a higher risk to lenders, potentially raising concerns about your repayability.
When you apply for a loan or credit card, lenders evaluate your creditworthiness by checking your credit report, leading to a hard inquiry.
Submitting multiple applications to several lenders within a short time period — may trigger multiple hard inquiries, potentially lowering your credit score and making you seem credit-hungry.
If a lender recently rejected your loan application, it’s best to wait for some time (generally 3-6 months) before reapplying. Instead, improve your CIBIL score first to increase your chances of approval.
Credit history refers to the number of years since you first opened a credit account. A more extended credit history helps lenders make informed decisions when offering you credit. It’s wise to start building your credit early so you can apply for a home or car loan when you apply for one. You’ll have a strong record of credit transactions.
Your CIBIL report contains a detailed history of your current and past credit accounts. Errors in the report can negatively impact your score, so if you spot any discrepancies, it’s crucial to get them corrected immediately.
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Only your lenders can rectify these errors—CIBIL does not make changes unless the lender reports the necessary corrections.
Regularly checking your credit report also helps detect potential identity theft and unauthorised activity.
Maintaining a balanced mix of secured and unsecured loans is essential for a healthy credit profile. Secured loans include home and auto loans, while credit cards fall under unsecured loans.
Relying too heavily on just one type of credit can impact your score. A diverse credit portfolio demonstrates your ability to manage different types of loans effectively — generally seen as a positive factor by lenders.
a. Visit the official CIBIL website
b. Under the “SCORE” section, click on “GET YOUR FREE CIBIL SCORE”
c. If you're a new user, register with your personal information, including your PAN card number. If you are already registered, log in with your credentials.
d. Provide required details like PAN card number, name, date of birth, and any other necessary information requested
e. Verify your identity through an OTP sent to your registered mobile number or email
Once verified, you will get your CIBIL score and report. Download or save it for future reference.
Below mentioned are some smart tips that may help to improve your low credit score include:
a. Making all credit payments on time and without delays
b. Keeping credit usage low and within recommended limits
c. Fixing any inaccuracies in your credit report promptly
d. Avoiding frequent applications for new credit
e. Keeping long-standing credit accounts active
f. Balancing different types of credit for a well-rounded profile
g. Consulting professional credit advisors for guidance
Check the documents required to apply for a personal loan.
Credit Scores are vital for financial health, but there are multiple misconceptions about them. Here are some common myths debunked :
This is a common misconception about credit scores: Checking your CIBIL score often — may lower the score. In truth, self-checks (soft inquiries) do not impact your credit score. Only lender-initiated checks (hard inquiries) can be affected when you apply for credit. Regularly reviewing your credit score is beneficial, as it helps you stay informed and manage your credit effectively.
Although your credit score plays a key role in loan approvals, its importance extends beyond that. Landlords, employers, and insurance companies may also review your score to assess your financial responsibility.
A strong credit score can impact various aspects of your life, from renting a home to landing a job in certain industries.
Unlike the common misconception, closing old credit accounts can reduce your credit score. This happens because it lowers your available credit and raises your credit utilisation ratio—an essential factor in your score.
Keeping older accounts open is generally advisable as long as they don’t come with costly annual fees.
Debt isn’t always a bad thing. A diverse credit mix—such as retail accounts, mortgages, credit cards, and instalment loans—can boost your credit score. However, maintaining a good score requires timely repayments, low credit utilisation, and a healthy debt-to-income ratio.
Successfully managing different types of credit demonstrates financial responsibility and strengthens your creditworthiness. Many misconceptions about credit discourage people from taking on any debt, but avoiding credit entirely isn’t a well-rounded financial approach.
This is one of the most misleading credit score myths. Your credit score is not fixed—it fluctuates based on your financial behaviour and credit activity. You can steadily improve your score by doing several things, including consistently making timely payments and managing credit responsibly.
Read: How to build a credit score from 0 to 750
Fi Money, with its Wealth Maximiser product, helps you take control of your finances while improving your CIBIL score. Its credit score feature provides key insights, highlighting areas for improvement and ensuring you get better interest rates on loans. It tracks your credit age, detects unauthorised inquiries, and flags issues like address mismatches that may affect your profile.
The product also identifies loans that should be closed but are still marked as active—helping you obtain an NOC certificate to rectify them. Additionally, it suggests which loans to close first based on interest rates and advises maintaining an ideal credit utilisation of 30% for a stronger credit score. With Fi Money, managing your financial health has never been easier.
Consider using trusted financial tools and services to gain a clearer understanding of your credit score and take charge of your financial future.
Fi Money offers features that help track account activity and provide insights to improve your credit health. It also allows you to download your credit report for free, equipping you with vital information to manage your finances wisely.
Debunking common credit myths enhances financial management and enables you to plan your future with confidence. Continuously educating yourself on financial matters and seeking professional guidance can further strengthen your financial well-being.
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