What is CIBIL?
TransUnion CIBIL or CIBIL (Credit Information Bureau (India) Limited) is India’s oldest Credit Information Company. This institution provides its participant’s services related to credit. Established in 2000, CIBIL is known to collect and maintain information related to the credit of Indian residents. On the basis of the credit information of the individual, this credit bureau generates credit score and report. Banks or other lenders, on the basis of this report, determine if the individual is eligible for a loan or not. The latest record says that CIBIL has 2600 members in its list and this includes a host of private and public sector banks, housing finances, and financial institutions.
What is CIBIL score?
This is a 3-digit number that ranges from 300-900. This score reflects how well or how badly a person has dispensed with a loan or a credit card earlier. This is also known as the CIBIL score or TransUnion CIBIL score. The higher your score, the greater the chances you have of getting a loan or a credit card.
How to get CIBIL score for free?
- Go to the CIBIL’s official website
- Click the link for free credit report
- Create your CIBIL account
- Fill out a form with details such as date of birth, gender, postal address and identity proof
- Accept terms and conditions
- Get your Credit Information Report (CIR).
This report can be availed free of cost once a year. To get CIBIL report in the same year again, you will need to pay a sum of Rs. 550/-. There are other paid subscription plans to access CIBIL reports and scores.
Why is CIBIL score very important?
To approve a loan or credit card application of the applicant, all banks and financial institutions check credit reports. It is the credit report that determines if the individual is financially stable or not. This enables the bank or lender to analyze if the individual will be in a position to repay the loan or not. If you have been regularly paying your credit card bills and loans on time, then your creditworthiness increases and that automatically ups your credit score. If your credit score is close to 900, this means that you have greater chances of being considered for a loan or credit card. If your CIBIL credit scores are less, then your chances for getting a loan or a credit card are slim. It is important that as an individual, you must check your score regularly and also maintain or improve your score.
What are the factors that can make your Credit Score go down?
It is a given that if your credit card balances are on the higher side your credit score automatically dips. Apart from that, the following factors can make your credit score go down.
- When you are late on your credit payments
- When your accounts are charged off when the credit card bills are not paid on time
- When you ignore your credit card bills
- When your bank has to make use of third-party to retrieve your loan amount from you
- When you drop in a request to close your credit card that has an outstanding balance
- Filing for bankruptcy
- When you apply for multiple credit cards or loans within a short duration of time
- When you have only a single type of credit account
- When you do not check your credit report and fix errors that have occurred.
How often does a change in credit score happen?
While credit scores are calculated from the credit report, it is vital that you remain patient when trying to improve your credit score. Requesting the score from multiple credit bureaus may bring a slight change in the figures. Creditors like banks and financial institutions usually report your credit information to the credit bureau every month. This report could be both positive as well as negative. Therefore your credit score will change every month based on the update given by the creditors.
What are the four main factors that impact your credit score?
There are four main factors that the credit bureau takes into account when computing your credit score. The four factors are listed below:
History of Payment
The primary factor that affects your credit score is your payment history. If you have not been paying your EMIs and credit card bills at the stipulated time, there are all chances that your credit score will go plummeting down. Therefore it is advised that you avoid delay and missing the payments. It is vital that you have a high score to get better deals on your credit cards and loans.
Credit Utilization Ratio
Better known as Credit Exposure, this is the credit amount you use with regards to the limit at any point of time. Experts believe that it is vital to use only up to 40% of your credit limit. Low credit utilization ratio denotes that you can handle credits sensibly, while high credit utilization ratio has an effect on your credit scores. Credit Exposure along with Payment History together cause an impact on your credit scores.
Period of Credit
Having a credit history that is old can do very well for your credit score. By throwing light on your repayment pattern, financial institutions can understand your repayment behavior.
Different Account Types
Your credit history must have a good balance of secured and unsecured loans. A mix of credits can help enhance your credit score. By having a mix of different credits, you are displaying to your creditors that you are experienced in handling varied types of credit.
What is a Soft and Hard Credit Enquiry?
A soft credit enquiry is when you request for your credit score or report and this does not impact your credit score much. However, when the bank or financial institution requests for your credit report, then it can impact your credit score. This is a hard enquiry. Therefore it makes sense to avoid applying for credit with various lenders within a short time span. This is because it will lead to multiple enquiries. Multiple enquires in a short span of time will bring down your credit score and your lenders will not offer you the credit you need.