As data suggests, nearly 79% of loans in India get sanctioned to consumers with a CIBIL score of 750 and above. This confirms that this numeric summary plays a vital role and provides a comprehensive picture to lending institutions while assessing an applicant’s loan eligibility.
Despite having such importance, a large section of India’s population is not even aware of CIBIL full form, calculation process, and other basics. This often leads to loan rejections, a visible impact on the repayment history, and difficulties in obtaining adequate funds during a financial crunch. To avoid all that, borrowers should know some necessary aspects related to CIBIL score before submitting their loan application.
How is the CIBIL score calculated?
This three-digit number ranges from 300 to 900, and the higher your credit score is, the better your chances are of getting easy approval from a lender. This numeric expression plays a significant role since financial institutions assess an applicant’s creditworthiness based on that.
With easy access to the internet, calculating CIBIL score or obtaining the entire credit report has become quite easier. You can simply visit the online portal of the credit bureau to get that done. However, to understand how to calculate the CIBIL score better, you need to be aware of the factors associated with it.
- Repayment history
The only way to understand your credibility as a borrower will be to assess how you have managed your previous loans. In case of missing EMI payments or defaulting on loan repayments, the credit history automatically gets impacted. It is advisable to make timely payments so that you can negotiate with a lender regarding both the loan amount and interest rates.
- Credit utilisation and existing debt
In most cases, borrowers tend to use their credit cards way too much just because they have a large credit limit. Note that excessive use of credit indicates that you are dependent on these funds, and there are chances of defaulting on loans if the process gets disrupted. According to experts, the credit utilisation ratio should be below 30% to be eligible for further loans.
- Multiple inquiries
Applying for multiple loans over a short period also lowers your credit score. Remember that whenever you apply for a new loan, your credit report gets assessed by the lender, reflecting in your CIBIL score. Rather, you should research and apply once you are completely sure about opting for a credit facility and have repaid the existing ones. However, monitoring your credit report periodically is not considered a hard inquiry. Therefore, it does not affect the score.
- Credit mix
Make sure your loan portfolio comprises both unsecured and secured credit facilities to build a strong credit history. Even though this particular factor has only 20% weightage in the CIBIL score calculation, you still need to meet this parameter to present yourself as a trustworthy borrower.
As the CIBIL full form suggests, all of your repayment records are evaluated by the credit bureau. Therefore, it is ideal to check your CIBIL score periodically and collect the credit report using their online portal.
Steps to check your CIBIL score online
Now that you have understood the importance of this three-digit numeric summary, here is the procedure you need to follow to check your credit score from time to time.
Step 1: Visit the official website of CIBIL and click on the ‘Get your credit score’ option.
Step 2: You will be required to submit some personal details, like identity proof, PAN card information, etc.
Step 3: Click on the ‘Submit’ button, and your credit score will be displayed on the screen. You can even provide your email address if you choose to get a hard or soft copy of your credit report.
Note that borrowers are required to pay a nominal amount to get their CIBIL score and report twice in the same year. And, checking this information from time to time is necessary for the following reasons:
- Maintaining your credit health: Once you are aware of your credit position, you can work on the aspects affecting your CIBIL score. It also gives you access to the outstanding amount of your loans and credit cards, including the debt owed.
- Accuracy: Keeping tabs on your credit history allows you to spot any kind of discrepancies that often take place. Once you flag the problem, you can immediately contact the concerned department to clear your CIBIL dispute.
Having a clear understanding of the CIBIL full form and its calculation process also helps you to know your limitations, assess your repayment capacity, etc. It further helps to work on the required parameters to improve the score to get prompt approval while opting for specific credit facilities.