Cibil Score: What is the CIBIL Score?

By Sujata Ahlawat

Consumers these days are turning to credit cards and loans to help them achieve their financial dreams and goals. The CIBIL score is one of the important factors and metrics to gain that much needed access to credit.

But what is the CIBIL score? And what are the factors that influence it?

Here are the answers to some of these frequently asked questions:

  1. What is a CIBIL score?
    A CIBIL score is a consumer’s credit score. Simply put, it is a three-digit digital summary of a consumer’s credit history and a reflection of the person’s credit profile. This is based on past credit behaviors, such as borrowing and repayment habits as shared by banks and lenders with CIBIL on a regular basis (details of which are presented in the consumer’s CIBIL report).

    The score is based on details found in the “Accounts” and “Investigations” sections of the CIBIL report, including (but not limited to) loan accounts or credit cards, payment statuses, unpaid amounts and the days after the due date. Ranging from 300 to 900, the closer a CIBIL score is to 900, the greater the chance that a consumer’s credit card or loan application will be approved.

    A person’s past behavior is seen as an indicator of their future actions, and in accordance with this, the CIBIL score highlights a consumer’s creditworthiness. For example, when a person applies for a credit card or a loan, one of the important factors that lenders check is the person’s credit profile as described by the CIBIL score.

    TransUnion CIBIL (formerly Credit Information Bureau (India) Limited) is India’s leading credit information company with one of the largest collections of consumer information. It was established in 2000.

  2. What is a CIBIL report?
    A CIBIL report is a consolidated credit report that includes the CIBIL score and consumer credit summary, personal information, contact information, employment information, and loan account information. It is important to note that lenders take both the score and the CIBIL report into account to assess a person’s eligibility for the loan.
  3. What are the factors that impact a CIBIL score?
    The CIBIL score is generated by a scoring algorithm, which takes into account a large number of data points and credit trends at the macro level. It is based on 36 months of credit history. Primarily, four key factors affect a consumer’s CIBIL score: payment history, loan mix of secured versus unsecured loans, inquiries, and credit usage. However, the latest CIBIL scoring algorithm also includes credit depth (that is, the length of your existing credit history since opening your oldest credit account), the long-term trend of balances. delinquencies, credit card transaction history, ratio of refund amount to total amount due and new accounts opened / accounts closed.
  4. How can you work towards a positive credit profile?
    Your CIBIL score is based on your credit history and past payments, but will impact your future access to credit. What you do today can help you build a stronger, healthier credit profile. Here’s how:

    *Always pay your dues on time because lenders view late payments negatively.
    * Keep your balances low, don’t overuse credit, and monitor your usage. And apply for new credit in moderation.
    * Maintain a good mix of secured (like home loans and car loans) and unsecured (like personal loans and credit cards) – too many unsecured loans can be viewed negatively.
    * Monitor your co-signed, guaranteed and joint accounts monthly. Keep in mind that you are also held responsible for missed payments in co-signed, guaranteed, or jointly held accounts, and the negligence of your joint owner (or guaranteed person) could affect your ability to access credit when you need it.
    * Review your credit history frequently throughout the year. Monitor your CIBIL score and report regularly to avoid unpleasant surprises (such as a rejected loan application). Regularly checking your report will also alert you to possible inaccuracies, if any. In the event of a discrepancy, you can register a dispute on the CIBIL website or ask the lender to report the correction to CIBIL.

A positive credit profile can make you a good bet for the lender and pave the way for access to credit. Remember to regularly monitor your credit profile to make sure you’re credit conscious and ready to lend when you need it most.

(The author is Vice President and Head – Direct to Consumer Interactive, TransUnion CIBIL.)

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