What is CIBIL Score and How Does it Define Your Credit Worthiness?

What does the CIBIL score mean? What importance does it hold in getting you any type of credit? What is a good CIBIL score and how can I build a good credit score? If you have all these questions floating in your mind and you have been finding the answers to them for long, then your wait ends now. In this article, we will be covering every important aspect related to CIBIL so that you would have a proper understanding of it.

What is CIBIL Score?

Credit Information Bearue of (India) Limited (CIBIL), is one of the top credit rating agencies that maintain all the credit-related information of the individuals and as well as companies. It also includes the loan and credit card related details. The agency takes the information from the different banks and financial institutions on a definite interval (monthly). Based on this information, CIBIL issues a Credit Information Report (CIR) (also known as the CIBIL report), and CIBIL score.

This CIBIL score decides your fate on getting any type of credit. Generally, this three-digit number ranges from a score of 300 to 900, with 300 being the worst and 900 being the best. A score above 750 is considered to be a good CIBIL score. It shows how well you’re at handling your debt. The better your debt handling skills and repayment behavior will be, the higher will be your credit score. With the help of your credit score, a lender can have an estimate about your credit health and repayment behavior.

What are the advantages of a good CIBIL score?

There are various advantages of having a credit score above 750. You can have a look at them below. 

• With a good credit score, the lender gives you instant approval on your credit facility as your score lets the lender have trust in you compared to an individual with a bad credit score.
• You can a lower rate of interest as the lender always wants a customer with good credit behavior.
• You can also get a longer repayment period compared to normal, only because of your credit score.
• While opting for a loan or credit card, you can get a higher credit card limit or higher loan amount based on your credit score.

What are the various factors that affect your CIBIL score?

There are various factors that can affect your credit score if you do not keep an eye on them. The most important factor is how timely you repay the loan - Repayment History. Almost 40% of your credit score depends on your repayment history. So if you pay all your credit bills and EMIs on time, chances are that you have a good CIBIL score. There are some other factors which are mentioned below.

Multiple Credit Applications: If you apply for multiple type of credit facilities at a single time, chances of this affecting your CIBIL score are pretty high.

Outstanding Debt: If you do not pay off your outstanding debts on time, it will keep piling up which may cause a huge dent on your credit score. So it is advised to pay your outstanding debts on time.

Paying only the minimum due amount: If you pay only the minimum due amount of your total debt, you will fall into the trap of revolving credit as there will be a compound interest charged upon the remaining balance of this month and the upcoming spend you will make.