Are you planning for investment and need to take a loan? Are you the one who is afraid of the hefty procedure for applying for a loan and therefore refrain yourselves from doing so most of the time? Don’t worry. Probably you have not heard of CIBIL. Here is a comprehensive guide to CIBIL which will help you figure out an easy way out.

Full Form of CIBIL

The full form of CIBIL is Credit Information Bureau India Limited. This is a verified agency managed by the Reserve Bank of India and calculates the credit score of any individual. CIBIL provides accurate information about the credibility of an individual by designating a certain score to him or her. 

The CIBIL Score 

The CIBIL score is a 3-digit number allotted to any specific person and is calculated on the basis of the individuals’ past history of borrowing and repayments. This score is generated by taking a close look at the credit history of the person concerned. CIBIL scores usually lie in the range of 300-900. So, the higher the score or nearer to 900, the more credible a person is considered and the easier he or she gets loans approved.

The CIBIL Report

The CIBIL report is a credit report that includes all the details regarding the credit score of the individual including the CIBIL score, credit history, personal information, employment details, and loan account information. So, it is a reliable instrument for the lending institutions to know about the person’s eligibility to take loans.

Factors affecting CIBIL Score

Past history of Credit Repayments

This is the biggest factor that contributes to generating a good credit score. It is based on how you have managed your credit histories, how and when did you pay off the debts, and in how much time. If you are a regular payer, then your credit rating will improve, and vice-versa.

Credit Age

This is calculated from the first day you take a loan or a credit card. It entirely depends on the duration of having a credit history. The higher your credit age, the more is your credibility.

Errors in Credit Report

Any mistakes in your credit report like the incorrect mention of loan details/ credit history or anything of that sort may have an adverse effect on the credit rating. Therefore, it is necessary to check the CIBIL credit report from time to time to rule out any errors.

Credit Utilisation Ratio

This denotes the credit limit of the individual and the amount utilized from the limit. Although it is advised to maintain the credit utilization ratio below 30 %, a larger ratio is not going to create a wider impact on the credit score.

Number of times applied

The credit rating of an individual is also dependent on the number of times he or she has applied for credit cards. The more times an individual applies for credit cards, the more vigilant lenders become to analyze the reason behind it. 

Advantages of High CIBIL Score

  • Quick loan approvals
  • Affordable interest on loans
  • Higher credit limit on the cards.
  • Pre-approved loans are approved easily.
  • Better discounts on sanctioning fees and all.
  • Better and useful rewards.

How to build a Good Rated Credit Report ?

  • Always clear dues on time to avoid any bad rating.
  • Using a credit card on a frequent basis can make things worse. Always try to manage your expenses within the amount you have. 
  • The credit report should be a consolidated mix of secured loans and unsecured loans. Too much of unsecured loans can affect your CIBIL score.
  • Keep a check on all the accounts associated with your credit cards. Any missed payments should be made as early as possible. 
  • Always be vigilant of the entries in your credit report. In case of any discrepancy or error, you can lodge your grievance on the CIBIL website.

Importance of CIBIL Score in the Loan Application Process

A fair CIBIL score is always handy when you are expanding your investment instruments. Lenders out there do not know you and all the information they have is your credit report. So, maintaining a good score helps you in the timely approval of loans or any credits. It is important to maintain a good profile and grab better opportunities so that it will be worth saying- “You earned it”!!

Conclusion

CIBIL is also looking forward to setting up a “fraud Repository”. This system will help CIBIL to store the names of all the borrowers who are associated with any bank frauds with any banks or other financial institutions.