Credit score India
Credit Score is assigned to you by credit information companies such as CIBIL, Equifax, HighMark. This credit score in turn is accessed by your prospective lenders. It is considered one of the most important deciding factors by bankers and lenders. This is because a credit score India will tell you and your lender how good or bad a borrower you have been. Higher your credit score, the better a borrower you are. This means that you probably make your payments on time. Hence lenders that lend to you face a lower risk that you will default. And vice versa - the lower your credit score, the higher the risk that you will default.
What is a CIBIL Score
- CIBIL score is a credit score generated by TransUnion CIBIL Limited (Formerly: Credit Information Bureau (India) Limited). CIBIL as is commonly known is an independent credit information agency. CIBIL Score is the most used credit score across lenders.
- A loan or a credit card must be taken only if you require one and have the means, the ability to make timely repayments. If you simply opt for a loan or a credit card and are unable to repay all the dues on time, not only will this ruin your long-term financial wellbeing, but it will also have an impact on your credit score.
- If you start monitoring your credit scores using credit bureaus in India, you would realize that your reluctance in repaying the loan or excess indebtedness affects your prospects of getting loans faster. And you would become more particular about the repayment of your loans and overdrafts and would avoid applying for the excess credit.
Factors to consider
While assigning a cibil score free check online India to individuals like you, CIBIL takes into consideration several factors.
- Your payment history reflects the details like your Days Past Due (DPD) and the month and year of payment. DPD indicates how many days past the due date you have made that particular payment. If the number is 0, it is fine. If your payment is even a day or two late, it counts as negative. The later you pay, the more negative this is.
- If you own multiple credit cards, and there are some you don’t use but still own, you must be sure to know each one’s Terms and Conditions. Some cards have no fees while others charge a fee from the second year onwards. If this is the case and you don’t pay the fees probably because you are unaware of them, then the fees and interest keep accruing, and this reflects on your CIR.
Current Credit Balance
- This also appears in the Accounts section of the CIBIL report. It shows how much outstanding you have on any loans you have taken. So, if you took a car loan and have paid off most of it and only have say Rs. 50,000 left, then Rs. 50,000 will reflect here, for your car loan. It shows how much debt you still owe.
- The lower this figure, the better. Lenders will not feel comfortable lending to someone who has a high level of current loans outstanding already while applying for a new one.
New Credit Facilities availed
If you have recently availed of loans i.e. new credit facilities, then your ability to repay a new loan will be less. This is negative for your application.
Number of New Enquiries
If you have recently applied for a few loans, this makes you look ‘credit hungry’. It makes it look like you are in urgent need of money. This also is negative for your application.
Important things to know
Your credit report India plays a critical part in the loan granting process. Based on your credit score, a bank will decide how much interest to charge you on the loan you want to take.
These reports contain your basic information, past payment history, overdue amounts if any, records of all the credit you have taken in the past, number of inquiries made on you by different lenders. All of this information is useful.
For example, if you have made a high number of inquiries with different lenders, it shows that you have approached multiple lenders for loans, whether those loans have been taken or not. This is not a good thing.
It is also important to note that not all lenders have the same definition for a ‘good credit score. For example, a CIBIL score of 670 may be an adequate credit score for certain loan providers, but many will reject a loan applicant with this score.
It is noteworthy that 80% of all new loans are sanctioned at credit scores above 750. The higher you score, the more favorably lenders will view your application.
Tips to improve your credit score
- The first thing you can do is to always pay your bills on time.
- Keep your balances low and control your credit usage. For example, if you have a credit card with a limit of Rs. 5 lakhs, try to not use Rs. 4.90 lakhs credit. High credit usage can be viewed negatively by a loan provider.
- Avoid Credit Hungriness. If you have made multiple new loan applications, it reflects badly.
- Carefully monitor any co-signed and joint accounts you may have. If any payments are missed by your joint holder or co-signer, you are held equally liable and this can affect your credit application when you make it.
Make Timely Repayments
- Your score will take a hit if you don’t repay in due time. Every time you default, it gets recorded in your report and eventually hurts your score. Always remember that your creditworthiness reflects your repayment history. Hence, to improve your score, keep making timely payments.
- One way to deal with this is by setting up standing instructions. In that way, you won’t miss the repayment dates.
Try to Have Different Forms of Credit
Maintain a healthy mix of secured and unsecured loans to be on the safer side. Multiple unsecured loans can hurt your score. Now here’s an important factor that you need to remember. In case you haven’t borrowed money before, you won’t have a credit history and that may harm your score. And without a good score, you will find it difficult to get a loan from banks.
Avoid Racking Up Debts
The number of loans against your name can have an impact on your score. Hence, it’s recommended to take one loan at a time. Clear it off and take another loan. Also, ensure not to over-utilize your credit card. As in, keep the utilization ratio between 20% and 30%. This will help you make repayments comfortably without any financial pressure.
Negotiate your Credit Card Limit with the Bank
As mentioned earlier, your credit utilization ratio can make or break you financially. If you over-utilize, your score may drop. You can get in touch with your bank to customize your credit limit based on your expenses.
Go for Long-term Loans
- The interest rates are lower for long-term loans and so are the EMIs. It will make it easier for you to make repayments and minimize the chances of defaulting. However, note that you will be paying more interest for long-term loans compared to short-term loans.
- Stretch within your means, and do not take a long leap that can jeopardize the financial well-being of your family and land you into a debt trap.
The advantages of having a good Credit score
Your Credit score plays an important role whenever you apply for a loan or credit card. Here’s how it is advantageous to have a good Credit score.
Get Loan Approvals quickly
Every financial institution will check your score before granting you a loan. If you have a good CIBIL score, the lender will consider you as a low-risk customer. This automatically betters your chances to get a loan.
Get Attractive Rates on your Loan
If you have a very good credit score in India, say above 800, the lender may choose to offer you impressive rates on your loan. Having a good score puts you in the good books of financial institutions. That way, you can negotiate the available rates and get a good deal.
Get Access to Credit Cards
Most financial institutions will check your score before giving you a credit card. So, if your score is on the higher side, getting a card won’t be that difficult. That’s because your credit history will show all the timely repayments you have made against your card or loan. And banks prefer customers who diligently pay their dues on time.
So, check your Credit score periodically to see if you need to work on your score. If you are falling short of the 750 marks, you can apply the above tips to boost your Credit score.
Is it possible to get an 850 credit score
Yes, you can aim for a credit score of 850 if you have the following:
Long-standing credit history
100% positive repayment track record
Good financial stability in the past few years
A strong source of income
A low credit utilization ratio
Where to check credit score
You can check your credit score with the credit bureaus directly. However, each credit bureau offers only one free credit score and reports once a year. If you need your credit score more often, you’ll have to pay a fee. The best way to check your credit score for free is to use a trusted site like CreditMantri. We offer your latest credit score for free and a free credit health assessment with just a few clicks.
A poor average cibil score in India means you’ll be ineligible for many services. Primarily, if you wish to opt for a loan, banks / financial institutions will refuse or lower the maximum they would have been willing to lend you. Your poor credit score might also result in a higher rate of interest along with the other hidden costs associated with the loan.
Questions and Answers
How to Fix My Low Credit Score?
- Well, there’s no shortcut here. Those individuals who have a low credit score due to poor borrower behavior in the past can improve their credit scores by paying their dues on time, repaying any late pending dues, and ensuring that they do not default on any payments in the future.
- It will take time, but small sure steps will raise the score.
- However, if your credit score is low, not due to past indiscipline but due to an error on the part of a lending institution or the part of CIBIL, do notify both the institution and CIBIL immediately.
- Why are the loans for which the individual is a guarantor showing up on the report?
- Banks and Financial institutions ask for a guarantor for certain loans as a means of security for the loan amount they provide. A guarantor on any form of loan is equally responsible to ensure the repayment of the loan. Hence, the guarantor provides a guarantee to the lender that he will honor the obligation in case the principal applicant is unable to do so. Any default on the payment of the loan by the principal applicant will affect your Credit Score as well.
How to get a score of more than 700?
To enjoy a credit score of more than 700, you must ensure to follow the below-mentioned practices with regards to your credit:
Make timely credit card and loan repayments
Increase credit limit
Keep credit utilization to a minimum
Avoid closing old credit card accounts
Focus on the length of credit history
How long will it take for me to get the best CIBIL™ score of more than 700?
There is no defined or fixed time for credit score improvement. It could take 3-6 months of consistently good credit performance to bring up your score to 700 if you have not had a credit history. In case you have a poor credit history currently, this timeline could further extend to a few years.