What is CIBIL and what does it have to do with your credit score?

When you're thinking about getting a loan, you've probably heard the word "CIBIL" mentioned. Banks talk about it, loan websites mention it, and experienced borrowers tell you it's important. But what exactly is CIBIL? And why do you keep hearing about your CIBIL score? In this guide, we'll explain everything you need to know about CIBIL and your credit score in simple terms.

Understanding CIBIL is crucial because it affects your ability to borrow money, the interest rate you'll pay, and how quickly your loan gets approved.

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Your CIBIL score is a three-digit number that summarises your entire credit history. It ranges from 300 to 900. Think of it as a grade – the higher the number, the better you look to lenders. A score of 750 or above is excellent. A score below 650 is considered poor.

This number is incredibly important because banks use it to decide whether to approve your loan application, and at what interest rate. A higher CIBIL score can save you thousands of rupees in interest payments over the life of your loan.

Additional read: Everything you need to know about your CIBIL score

So where does this CIBIL score come from? CIBIL stands for Credit Information Bureau (India) Limited. It's the oldest credit rating agency in India. The company was started in 2000 and later partnered with a US company called TransUnion. Today, it's called TransUnion CIBIL Limited.

CIBIL operates under a license granted by the RBI (Reserve Bank of India) and follows the Credit Information Act of 2005. Here's what they do: whenever you take a loan or use a credit card, CIBIL records this information. Banks, credit card companies, and NBFCs (non-banking financial companies) all send CIBIL monthly updates about your borrowing and repayment. So if you've ever applied for credit – a personal loan, home loan, car loan, or credit card – CIBIL has your information on file.

Beyond just a score, CIBIL also creates a detailed report about you called a Credit Information Report (CIR). This report is like a complete biography of your credit life. It includes:

• Your repayment and borrowing history – every loan you've taken and how you've repaid it
• Ongoing loans – what you currently owe
• Credit card dues – your credit card history and balances
• Employment history – where you work

• Loan enquiry information – every time you've applied for credit

  
  

You can actually download your CIBIL report from the CIBIL website anytime. Reading this report helps you understand what information banks are seeing about you. It also lets you spot and report any errors to CIBIL. The good news? You can now check your CIBIL score for free with Bajaj Finserv at no extra cost. Just enter your basic details and you're done.

Now, you can check your CIBIL score with Bajaj Finance.

Additional read: How credit score is calculated

So how does CIBIL turn all this information into a three-digit score? They analyse your credit report and calculate a score based on your credit behaviour. This score keeps changing constantly because your credit behaviour keeps changing.

• When your CIBIL score goes DOWN:
  • Your score drops when you miss EMI payments or make multiple loan applications in a short time (like applying for 5 personal loans in a month). Even one late payment can hurt your score.
• When your CIBIL score goes UP:
  • Your CIBIL credit score will increase when you pay your EMIs on time every month, prepay your loan (pay it off early), or pay your complete credit card bill on time. Consistent good behaviour builds a stronger score.

Interestingly, even companies have a commercial CIBIL score based on their borrowing and repayment history. It works the same way as personal CIBIL scores.

This is where CIBIL becomes really important for you. Here's how it works:

• What happens to your information:
  • You send your credit information to CIBIL (through banks and lenders). But here's the key – those same lenders can also ACCESS your information from CIBIL. So when you apply for a loan, the bank checks your CIBIL score to decide if you're trustworthy.
• How your score is used:
  • Your CIBIL credit score shows how good your credit history has been. It tells lenders: "This person has been responsible with money in the past, so they're likely to repay this new loan." A higher score means you're more likely to get approved and at a lower interest rate.
• What lenders look for:
  • When you apply for any form of credit – whether it's an instant personal loan, home loan, or credit card – lenders use your CIBIL score to assess your creditworthiness. They're essentially asking: "Has this person paid back their debts before? If yes, will they pay back this loan?"

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