The banking industry is a service related to trust and confidence. The word “credit” shows confidence. Banks collect information about borrower from Credit Information Bureau (India) Limited. This Bureau is also known as ‘Cibil’.
Cibil collects information from banks and financial institutes, analyze it and delivers information. It also educates its consumers to maintain its finance in a better way.
Credit Information Report (CIR)
Cibil Report or CIR is a report which helps banks to analyze creditworthiness of a person or company. There are 2 types of CIR:-
- Credit Information Report shows credit history of an individual with a statistically derived figure.
- Company Credit Report (CCR) is a report showing the history of company’s credit. Cibil derives this information from different banks and financial institutes.
Cibil Report and Cibil Score
Cibil Report contains personal information of an individual. It also contains data on loans and credit cards he applied for. Even if that loan or credit card was not sanctioned, it will be in this report. Payment track record, sanctioned amount, payment history, o/s balance, etc are also included in it.
Cibil Score or Cibil Transunion score is a 3 digit number assigned by Cibil based on above information. it is always between 300 and 900. Better will the creditworthiness of a person higher will be his score and vice verse. If your Cibil Score is between 750 & 900, all banks will be ready to provide you loans. If it is between 700 & 750, you will get it at competitive interest rates. From 550-700, banks will approve your loan with a significant credit check. Below 550, it is difficult to get loans from organized lenders.
Calculation of Cibil Transunion Score
Calculation of Cibil score is based on following factors:-
- Past performance – Consumer’s past performance is most important. His past performance on debt obligation contributes 30% of its weightage.
- Credit type and Duration – Credit duration and its type (secured or unsecured) gives 25% score.
- Credit Exposure – Credit exposure on total amount gives 25% score.
- Other factors – Consumer’s credit utilization and credit behavior gives 20% score.
7 factors affecting your Cibil Score –
- Utilization of full credit limit on credit cards
- Making late payments or default in payment in last 3 years.
- Having the high amount of unsecured loans.
- Frequent Inquiries
- No credit history or short term credit history.
- Settlement of previous loans at concessional rates.
- Giving guarantee without thinking.
How to improve your Cibil Score?
- Payments – Make all your payments on time. Late payments will affect your Cibil score
- Loans – Have a healthy combination of secured and unsecured loans. Only secured loans or only unsecured loans may decrease your Cibil Score.
- New Credit – Think twice before opting for new credit whether it is loan or credit
- Analyze – Always analyze your accounts. Keep an eye on your all accounts including joint accounts. Be sure that no payments are missed.
- Guarantor – Try to be a guarantor of a person with high creditworthiness. Providing a guarantee to less credit worthiness person may decrease your score.
- Credit Hungry Behaviour – Avoid credit hungry behavior. Ignore applying for too many loans in short span of time.
- Settlement – Avoid opting for settlement in your dues. Always pay your full payments.
- Credit Limit – Always use only 30-40% of your credit card limit every month. This will improve your score.
- NOC – Never forget to get your NOC after closing your Credit card.
You can also check out the latest Infographics on Tips to Improve Your Credit Score.
The cibil score is increasing its importance in financial sector day by day. According to a study, 90 % loans sanctioned are of individuals with the score of 750 or above. Credit being an essential part of an individual’s life, it is important for every person to plan for a better Cibil score. Higher the score, higher are the chances of banks approving your loan. Still, it totally depends on a bank to approve or disapprove your loan. Cibil does not interfere in this decision. It is advisable to maintain a good credit score which will help you to get loans easily. You can check your Cibil score online via Cibil Online Credit Score Request Form available on official CIBIL Website.