Picture this: You lend ₹5,000 to your friend and your friend promises to return it to you within a month. However, your friend forgets to return the amount, despite persistent reminders. After this incident, you would be reluctant to lend money to that friend.
Similarly, banks and financial institutions prefer issuing credit cards and loans to those who seem worthy of it, i.e. those who will pay back their loans in a consistent and timely manner. Your CIBIL Score is, thus, the metric used to determine your creditworthiness by financial institutions in India and is derived by the credit bureau CIBIL (Credit Information Bureau [India] Limited). Incepted in the year 2000, TransUnion CIBIL, a credit information company, is first of a kind in India.
What is the CIBIL score?
Your CIBIL score explains your credit history. The CIBIL score range lies between 300-900, wherein an individual having a score above 750 is considered to be a reliable borrower. A CIBIL Score between 550 to 699 is considered to be average. A higher credit score helps secure the lender’s confidence while a comparatively lower score decreases your chances of a successful loan application.
Who updates your CIBIL score?
Generally, NFBCs and banks update your credit information every 35 to 40 days, following which your CIBIL score is calculated accordingly. In case your loan lender has not submitted your loan information to CIBIL, you may experience a delay. If your CIBIL score is not updated for more than 2 months, it’s time you get in touch with the institution.
How to check your CIBIL score?
You can visit the official CIBIL website to check your CIBIL score. However, to get a complete personalized financial health check report, you can opt to get your free report on Finserv MARKETS. Here’s how to check CIBIL score and get a financial health check report on Finserv MARKETS:
- Visit the official Finserv MARKETS website
- Click ‘Check your CIBIL now’ options on the top right corner of your screen
- Fill your credentials
- Select your profession and click on ‘Get OTP’
- You will receive an OTP on your registered mobile number and your email
- Once you re-enter the OTP, your Financial Health Check Report will be mailed to you within minutes!
What are the factors that affect your CIBIL score?
There are 4 significant factors that affect your credit score. They are:
- Loan repayment history: A lousy credit history is an indicator of poor money management habits. The bank also considers your timeliness in repaying your debt. Your timely or advance payments act as an indicator of your creditworthiness and thus builds trust.
- Sudden credit increase: Whether it is for your credit card or a loan, a specific credit limit is assigned to you. Using the limit to its brim may however raise red flags for the financial institutions. If your credit limit is maintained for months but is observed to be suddenly used up to the limit, it may reduce your CIBIL score.
- DTI ratio (Debt to Income): This is a method to gauge an applicant’s ability to repay loans according to their income. Debts of more than 40% of the applicant’s income are not encouraged.
- Too many loans: Numerous loans in a single applicant’s name is alarming to the lenders. It is therefore recommended that one completely repays a loan before applying for another.
How can you improve your CIBIL score?
Here are a few things you can do to improve your CIBIL score:
- Check your CIBIL score: In order to understand why your score is poor, you need to firsthand check your CIBIL score
- Do not delay payments: Postponing your payments at times of cash crunch is natural, but to improve your CIBIL score, do not delay repaying your dues. Also, do not keep unused credit cards with you for long.
- Prolonging repayment tenures: Extending your loan repayment tenure mid-way for a smaller installment can lead your CIBIL score to drop.
It is crucial that you check CIBIL score regularly. Contrary to the common myth, checking your CIBIL score regularly does not lead to a drop in your score. On Finserv MARKETS, you can get a free CIBIL score along with the Financial Health Check Report, which is simplified and personalized as per your credit history. Check your CIBIL score on Finserv MARKETS now to help you make informed decisions about your finances in the future.