Having a good CIBIL score gives you leverage while applying for a loan as it portrays you as a responsible and trustworthy borrower. This is because it consolidates your past credit history and repayment behaviour and provides a comprehensive picture to prospective lenders. A higher score makes you more creditworthy and vice versa. To understand this score better, learn how your CIBIL credit score is calculated.
Basics of your CIBIL score
This 3-digit numeric representation ranges from 300 to 900. In this CIBIL score range, 900 is considered to be the highest while 300 marks the lowest score. Thus, the higher your CIBIL credit score is, the more likely it is for you to get approval on your credit application. Typically, a score of around 750 or above is considered ideal to get your loan application approved.
How is CIBIL score calculated?
- Repayment history
Timely repayment of any credit you have availed is a key factor in determining your credit score. Missing payments may have a negative impact. - Type of credit and repayment duration
Having a healthy mix of credit types and maintaining them responsibly over time can positively reflect in your credit profile. The duration for which credit is used also plays a role. - Existing debt and credit utilisation
The amount of credit currently used relative to your sanctioned limit can influence your score. Responsible usage of available credit is generally recommended. - Credit inquiries
Each credit application can appear in your credit report. Frequent applications in a short period may be noted, so it is advisable to apply for credit thoughtfully.
CIBIL Score range
- Excellent (751–900): Indicates a very strong credit profile, making it easier to get loans and credit cards approved.
- Good (701–750): Shows a reliable credit history; lenders usually consider applications favourably.
- Fair (651–700): Reflects moderate credit behaviour; approvals may come with higher interest rates.
- Average (601–650): Suggests caution; loan approval may be challenging.
- Poor (300–600): Indicates weak credit history; improving repayment behaviour is essential to raise the score.
What CIBIL score should you maintain for loans
For personal loan approval, maintaining a CIBIL score of 685 or above is important. A score in this range reflects fair creditworthiness, making you eligible for a personal loan. Higher scores improve your chances of approval, often with better interest rates and flexible repayment options
Scores between 700 and 749 are considered good, usually resulting in faster approvals and competitive offers. A score of 750 or above indicates a highly reliable borrower, unlocking the most attractive loan terms.
If your score is below 685, focus on improving your credit profile by paying dues on time, keeping credit utilisation low, and regularly checking your credit report for errors. Correcting any inaccuracies can positively impact your score.
Factors that affect CIBIL Score
Your CIBIL score is influenced by several key factors. Understanding these can help you maintain a good score and increase your chances of loan approval. You can also use a CIBIL score calculator to assess your score and take steps to improve it.
- Payment history: Late or missed EMIs significantly impact your CIBIL score, lowering your chances of getting approved for a personal loan.
- Credit utilisation ratio: Using more than 30% of your credit limit can negatively affect your score. Try to keep your credit utilisation ratio low for better results.
- Credit mix: A healthy mix of secured and unsecured loans can improve your score, as lenders prefer borrowers with diversified credit.
- Length of credit history: A longer credit history reflects a more reliable borrower, positively influencing your CIBIL score.
By regularly using a CIBIL calculator, you can stay on top of your credit score and make informed financial decisions.
Tips to improve your CIBIL score
- Pay bills on time: Timely repayment of EMIs and credit card bills has the most significant impact on your score.
- Maintain a healthy credit mix: Use a combination of secured and unsecured loans responsibly to strengthen your credit profile.
- Monitor credit utilisation: Keep credit card utilisation low; avoid maxing out your credit limits.
- Limit loan applications: Multiple credit inquiries in a short span can negatively affect your score. Apply for credit only when necessary.
- Regularly check your credit report: Identify and rectify any errors to ensure your score reflects accurate information.
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