All You Need to Know About Your CIBIL Score

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Credit Score and Magnifying Glass

CIBIL is seen identical to credit score which is a three-digit number that is seen by a lender to ascertain a person’s creditworthiness. It lies between 300 and 900. RBI has licenced four companies in India to access and manage the credit information. CIBIL which started its activities in 2001 has been the oldest and so far the most popular one. The other three are Equifax, Experian and High Mark.

What is CIBIL?

It stands for TransUnion CIBIL Limited which is an Indian company having legal access to credit information of both the borrowers as well as lenders. It has data of around 600 million people including 2,400 lenders belonging to all varieties. It is the most trusted credit information companies in India and every lender accepts its score as genuine.

If you are worried about what is CIBIL score how to check, here is complete information on it.

What is CIBIL/Credit Score?

The score given by CIBIL is referred to as CIBIL/credit score which is often the sole deciding factor to get your loan application approved or denied. It can also affect the borrowing rates in some cases, where a higher credit score makes you eligible for lower rates.

How to Calculate the CIBIL Score?

This score comes from a combination of five components with associated weights. These are

Payment History with 35% weightage, amounts owed gets a weightage of 30%, Length of Credit History is at 15% weightage, Types of credit in use and Account inquiries get 10% each. The combined effect of all these factors gives the credit score, which a potential lender look at to ascertain the risk involved in lending the money to a particular borrower. The higher the score, the lesser, is the risk. Any score above 700 is considered as excellent and lenders are always willing to lend loans to such clients. It’s better to know your credit score before applying for a loan and for that you can make use of any credit score site that offers it for free.

Impacts of Poor Credit Rating

If you have a poor credit score, you can be charged higher interest rates as some lenders follow ‘rate-for-risk’ pricing. As the lenders see you as a risky entity they might lend only a smaller credit limit and if the scores are really bad, your credit application might also be rejected. This is because your low credit score implies; that their money is at risk and they might not be able to get it back in time.

Thus, you see how important is the credit score and what role it plays and hence, you should work towards having a good score. To improve your score there are no shortcuts and any quick-fix efforts can actually backfire. So refrain from trying them.

The right way to improve your Credit score is to set up payment reminders to make payments on time, and pay the highest interest rates debt first.

A good credit score is your ticket to get credit at attractive rates and hence, should be taken care of.

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