Your CIBIL or Credit score plays a vital role in acquiring any kind of financial assistance, be it short-term or long-term.
Your creditworthiness, which is determined by your CIBIL or Credit score, is a crucial factor in deciding whether you will be approved for a loan to buy a smartphone, a new car, or even your dream home.
The higher your credit score, which should ideally be close to 900, the easier it will be for you to get loans approved quickly and at a lower interest rate.
Maintaining a high credit score is a challenging and often frustrating task.
What is CIBIL Score?
Credit Information Bureau (India) Limited provides a three-digit credit score known as the CIBIL Score for every registered citizen representing an individual’s creditworthiness to lenders.
What is the Lowest and Highest Credit Score?
Major Factors that effects CIBIL Score
Three major factors play a major role in building and deteriorating your CIBIL Score:
1) Payment History
Failure to make timely and complete payments can significantly lower your CIBIL score. You need to have a good payment history.
2) Multiple Applications
Submitting multiple financial assistance applications within a brief period can cause a drop in your CIBIL score. This includes applications for credit cards, short-term loans, or long-term loans.
3) Credit Utilization Ratio
Utilizing more than 30% of your approved credit limit can have a negative impact on your CIBIL score or credit score. This suggests that you rely heavily on borrowed money.
What are Credit Checks?
There are mainly two types of credit checks – 1) Hard Credit Checks (Hard Query) and 2) Soft Credit Checks.
A hard credit check is an in-depth examination of your credit report, usually conducted by a lender to determine whether to approve your loan application or not. A hard inquiry can lower your credit score by a few points and will be visible to others.
In contrast, a soft inquiry provides a general overview of your credit report, which is typically performed by yourself when checking your CIBIL score.
How much time required to Improve CIBIL?
If your credit score has declined, you can improve it by engaging in healthy financial habits. However, it’s important to note that your score won’t improve overnight and may take an average of 4-6 months to start trending upward.
How to report Credit Bureau errors?
There are four major credit bureaus in India, namely CIBIL, Experian, Equifax, and CRIF Highmark that provides a credit report to Individuals. If you notice an error in your report and want to correct it, you need to file a dispute with the relevant credit bureau.
What can be the Errors on your Credit Report?
Regularly checking your CIBIL report is essential as any errors can have a significant negative impact. If you spot an error, it’s important to make a claim to the relevant credit bureau to rectify the mistake.
Here are the most common errors you can find on your CIBIL report:
- Wrong Overdue amounts
- Inaccurate outstanding balance
- Duplication of accounts
- Wrong personal details
Should you check CIBIL before applying for Loan?
Yes, it’s recommended to check your CIBIL score before applying for a loan, and also periodically to monitor any changes.
Lenders use your credit score to assess your creditworthiness and determine the likelihood of approving your loan application.
By checking your CIBIL score beforehand, you can get an idea of your creditworthiness and take steps to improve it if needed.
Having a high CIBIL score can increase your chances of getting approved for a loan with favorable terms and interest rates.
Will checking my own CIBIL will affect it Negatively?
It is recommended to check your CIBIL score at least once every quarter to keep track of any changes and maintain a good credit score.
As your credit score can be affected by every financial activity of yours, it’s important to be aware of its variations.
Checking your own CIBIL score is considered a soft credit check or soft query, which does not negatively impact your score.
