A credit score is a numerical representation of an individual’s creditworthiness, which is based on their credit history. Different industries and fields often develop their own specialized terminology and jargon. Abbreviations can help simplify this language and make it more accessible to those who are not experts in the field. A term you may have come across is CIBIL score.
The Credit Information Bureau (India) Limited (CIBIL) is the most popular of the four credit information companies licensed by Reserve Bank of India (RBI). Though RBI has allowed 3 other companies to work an individual’s credit score, CIBIL score remains the most popular.
What is a CIBIL score?
CIBIL Score is a three-digit numeric summary of your credit history. The score is derived using the credit history found in the CIBIL Report (also known as CIR i.e Credit Information Report).
A CIR is an individual’s credit payment history across loan types and credit institutions over a period of time. A CIR does not contain details of your savings, investments or fixed deposits.
Why and when does your CIBIL score matter?
The CIBIL score plays a critical role in the loan application process. When someone approaches a bank or a financial institution for a loan, the lender first checks the applicant’s CIBIL score and report.
If the CIBIL score is low, the bank may not even consider the application further. If the CIBIL score is high, the lender will look into the application and consider other details to determine if the applicant is credit-worthy.
Your CIBIL score, calculated based on your credit behavior as reflected in the ‘Accounts’ and ‘Enquiries’ section of your CIR, ranges between 300-900. A score above 720 is generally considered good.
How can you improve your CIBIL score?
You can improve your score by practising financial prudence –
- repay your Credit Card bills on time (and in full)
- don’t miss your loan EMIs
- never default on debts
- use credit wisely
- review your credit history frequently throughout the year
You can check your CIBIL score from your own bank, or from here
Overall, a good credit score can provide significant financial benefits and make it easier for you to achieve your financial goals. So do your best to maintain a high CIBIL Score for yourself. Always.
Note: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action.
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