Your credit score is nothing but a 3-digit number provided by the CIBIL (CIBIL full form is Credit Information Bureau (India) Limited), which shows your credit history. And whenever you place an application for a loan, the lender requires your CIBIL score to review all your repayment past records and debts to check your creditworthiness.
Here, you may wonder – how I can check my CIBIL score?
You can easily check your CIBIL score by approaching the CIBIL site or any online lending marketplace. A strong CIBIL score shows that your finances are in the correct order, and you have a strong track record for all your past borrowings. Moreover, it assists you in getting the loan approved at a suitable interest rate. However, a poor CIBIL score works the other way around and can lower your creditworthiness. X
How is your CIBIL computed?
Multiple factors build up your CIBIL score, and based on the same, your CIBIL score is calculated:
Your repayment history –
Timely repayments for your past and existing loans impact your credit score in a positive way and may result in a high credit score. On the contrary, delayed payments reduce your credit score and may make availing of a loan challenging in future.
Having a strong repayment history always shows that you were on the spot with your repayments, and this makes the lender trust you thoroughly for all your new borrowings. As an outcome, a loan application with a strong credit score always gets approval. While delayed repayments also result in late payment fees, penalties increase the overall amount to be paid. Thus, to avoid these consequences, ensure to repay the loan on time, and this would even assist you in maintaining a strong CIBIL score.
Multiple loan applications –
When you are looking for a personal loan, applying for this multiple times with distinct lenders can result in hard inquiries on your credit score. This can further affect your credit score. So, it is always best to check your CIBIL score before you place an application for a personal loan. Doing so would also assist you in knowing your eligibility, and thus you can apply with the lenders who perfectly fit into your eligibility parameters. It even lowers your loan rejection chances and ensures a loan approval.
Type of credit option availed in the past –
Taking up multiple loans enhances your debt-to-income ratio, and when it’s multiple unsecured credit options, it is negatively viewed. So, if you have placed an application for multiple loans in a short time period or have various credit cards, then it can make you appear as a credit-hungry individual, and lenders might hesitate to lend you under these conditions.
Write off –
Write off can impact your credit score on a massive level. Additionally, current write-offs hurt your credit score more negatively than the older ones. To avoid its impact, it is necessary for you to check your credit score before applying for a loan. Doing so will even endow you with a good idea as to whether your loan application will get approved.
How to form a CIBIL score?
An individual with zero borrowing records has nil to negative CIBIL scores. This is not thought to be as good as lenders do not have any past record of yours to depend on. So, if you require availing of any loan in the upcoming future to lower the hassles, you must form a good credit record. Steps to form a credit record –
Place an application for a credit card –
Placing an application for a credit card and using it can form a credit report in your name. However, before you opt for it, you must remember that credit cards have a high rate of interest charges. To maintain good finances, you must be timely with your credit card repayments.
Take a small amount of personal loan –
Availing of a small amount of personal loan will assist you in forming a credit report. However, to move your credit score in a positive direction, you must require being timely with your repayments. Moreover, you can select to close your loan account positively by opting for the pre-payment, as the rate of interest incurred for an unsecured loan is very high. Besides these, it is necessary to check your score once every 6 months. Doing so would assist you in correcting the incorrect reporting and correcting the errors, if any, in your report. In the case you see any discrepancy, then you must instantly report the same to CIBIL or write to your bank lender.
Your credit score might not match with scores generated by the other bureaus –
Credit scores generated by the TransUnion CIBIL, as well as other credit bureaus like CRIF High Mark, Experian, and Equifax, might or might not be the same with identical credit info. This is because every bureau uses its scoring model to compute credit scores. The next reason your CIBIL score varies from the score generated by other bureaus is that the updated credit info from distinct lenders is reported to the credit bureaus on distinct days.
CIBIL does not delete or edit info from your credit report without informing –
CIBIL generates your report based on the credit info that they get from different credit sources like NBFCs and banks. They do not hold the authority to edit or delete your credit info directly. They can update your report but just when the changes are authorized and provided by the credit source.
You can check your CIBIL score multiple times without hurting your credit score –
If you enquire about your CIBIL score directly from the credit bureaus or via authorized 3rd party entities, it is known as a soft enquiry. A soft enquiry, no matter how many times are done, does not affect your CIBIL score. Your CIBIL score is impacted when banks, credit card issuers and creditors enquire regarding your report from the bureau. Thus, avoid hard enquiries to the extent possible.