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What is meant by CIBIL?
The Credit Information Bureau (India) Ltd, better known as CIBIL, is the premier agency for providing credit reports and scores pertaining to individuals. CIBIL sources financial data of individuals such as loan and credit card information from leading banks and other financial institutions in India. This data is then presented in the form of a CIBIL credit report, also known as a Credit Information Report (CIR).
CIBIL was incorporated in 2000 and has continued to expand its presence throughout the country. It is backed by Trans Union International and Dun and Bradstreet, which are major global credit bureaus and agencies.
What is a CIBIL score?
CIBIL credit score or credit rating is, in short, a 3-digit figure ranging from 300 to 900 points which denotes a person’s credit worthiness. This figure is derived from the CIBIL report of an individual through advanced statistical algorithms that take into account their credit history including borrowings, repayment patterns, defaults in repayment and other data relevant to a person’s credit worthiness.
CIBIL scores are calculated on the basis of at least 6 months of historical financial data of an individual. The data is fed into an algorithm with 258 different variables; each with a different weight age.
Analyzing your CIBIL score :
- -1: This implies that the borrower has no previous history of borrowings with any bank or other financial institutions in the country i.e. no credit history.
- 300-600: Individuals with CIBIL credit scores in this slab are considered to be a credit risk by banks and other financial institutions. In general, credit cards and loans will not be provided to people in this slab.
- 601-750: This is the intermediate range of scores and will allow you to borrow from various lenders. However, banks may refer to your overall financial position and consider other risk related criteria to ascertain your creditworthiness e.g. stable employment, different sources of income, loan security etc.
- 750+: Scores above 750 are considered to be good and will help you in getting loan or a credit card with ease. If your credit score is high, you can leverage this to negotiate with lenders for better/lower interest rates.
It helps in analyzing your true financial standing and make plans for future finances.
- You can be on top of your borrowings and avoid debt traps.
- With a CIBIL score in hand, you are in a great position to make decisions regarding availing new forms of credit, while also being able to extract the best possible rates from banks or other lenders.
- It helps in cultivating financial discipline.
- On time loan EMI payments.
- Regular payment of credit card bills.
- Paying credit card bills in full rather than paying minimum due amount every time.
- Avoiding over-leveraging.
- Maintaining strong financial records.
- Too many forms of credit (such as unsecured personal loans) among family members. Proper utilization of approved credit limit.
- Ensuring banks and other financial institutions you’re dealing with record and Requesting and maintaining a copy personally rather than through financial institutions.