What is a CIBIL Score?
CIBIL stands for Credit Information Bureau (India) Limited is a credit rating company (presently known as TransUnion CIBIL) which maintains one of the largest collections of consumer information in the world and rates it in form of a score. CIBIL Score is a score in between 300 to 900 which reflects the credit worthiness of an individual to pay. It’s normally given by the top credit rating agency on the basis of their outstanding amount of a loan or credit card due and other credit history like payments and due. If an individual has a score of 750 then the score is very good to give a loan or credit card. The Score 830 says the person has an excellent track record of his/her payments. Thus we can say that a CIBIL score reflects an individual overall credit history.
The credit score is an important factor in getting loan, so one should improve it. If an individual has credit score less than 630 then the approval of his/her loan is not easy. It is necessary that You should make sure to have a good credit score before applying any loan. The CIBIL score reflecting NA (Not Available) or NH (No History) does not mean that the individual has the bad credit score. It means that the credit history for that individual is not available right now or we can say that the particular person is not applied for a loan or credit cards since last 6 months.
How CIBIL Score helps you in getting a loan?
The CIBIL Score is the main factor in getting a loan or credit cards. It is usually decide by the credit rating agencies like ACRA, CRISIL and India Credit Rating which normally decide a credit score on the basis of their payment history or obligation to pay throughout his/her available credit limit. One can easily apply for credit score and see your report through these credit rating agencies. Now we should understand the factors which affect this Score.
4 Important Factors affecting CIBIL Score:
- Timely payment of EMI of a Loan or Credit Card due
- Outstanding Loan amount
- A credit mix of both secured and unsecured loan
- Being a guarantor in other loan applications
How timely payment for EMI of a Loan or Credit Card due affects the CIBIL Score of an Individual:
This is the main factor which affects an Individual Credit Score. It is very important to make the payment in time for an individual. If EMI of a loan is not paying on time it will badly affects one individual credit score. The CIBIL score of an individual is very much dependent on the history of repayment of the EMI for a Loan or a credit card due. If an individual pay their EMI on time his/her credit score improves.
How the outstanding loan amount or credit card due affects the CIBIL Score of an Individual:
Another important factors which affect the individual credit score is the amount which is lying as outstanding for a loan or the credit card outstanding. The amount for a loan is always affecting the credit score of an individual since it defines his/her financial status. Also an Individual income should be always greater than his/her outstanding loan amount which smoothen their payments that is there will be no hustle to make any future payments.
How the Credit Mix of Secured and Unsecured Loan affects the CIBIL Score of an Individual:
Credit Mix is an important factor to understand in the context of loan or credit card. The credit mix comprises of all types of loans like Personal Loan, Home Loan, Car Loan, Business Loan, Gold Loan etc and the Credit Cards available for or applied by an Individual. Through credit mix it is important to have secured loan more than unsecured loan. The secured loan percentage of credit mix is proportional to credit mix that is if the credit mix percentage of secured loan increases then the credit score will improve.
How being a guarantor in other loan applications affects the CIBIL Score of an Individual:
Being a guarantor in other loan is another important factor which affects an individual credit score. Being a guarantor/ co-applicants in a loan application form makes you equally liable for missed payments. If you’re guaranteed an individual, who had applied loan, missed the payments or defaulted the loan payments then your ability to get a loan deny when you need it. Thus being a guarantor is the very crucial factor in affecting CIBIL Score.