Around 79% of all loans in India are approved for consumers with a CIBIL of 750 or above. CIBIL or the Credit Information Bureau (India) Limited is an organisation, which tracks the creditworthiness of each Indian, through his/her credit history and other factors.
All lenders today thus check a loan applicant’s CIBIL or credit rating in general, when processing a loan application. Therefore, to improve one’s likelihood of availing loans, he/she must be aware of CIBIL score calculation and the factor that weigh in to determine one’s score.
What is CIBIL score?
CIBIL or credit rating refers to a 3-digit numeric figure, representing the creditworthiness of an individual based on prior handling of loans or advances and credit discipline adopted. An individual with a clean record of timely repayment of loans or credit card debt often carries an impressive CIBIL score and vice versa.
CIBIL scores range between 300 and 900, whereby a score of 750 or above is generally considered sufficient to avail various kinds of loans in India. While you can get a personal loan if you have a bad CIBIL score, it is best to take measures for score improvement when planning to avail finance. It is primarily because the terms for such a loan are often not in the borrower’s favour.
Factors affecting CIBIL score calculation
The following four major aspects determine whether an individual carries an impressive credit rating or otherwise –
- Payment history – It refers to your track record of servicing loans in general, and is indicative of your repayment habits. Your payment history thus depends on whether you have closed dues in time or if you have defaulted on such payments in the past.
- Multiple enquiries – Successive and substantial number of loan enquiries can hamper your credit rating since it indicates that you are likely to avail fresh debt soon.
- Credit mix – If you want to improve your CIBIL score, attaining the perfect balance between secured and unsecured credit mix in your loan portfolio is critical. If you avail too many loans of one particular kind, your credit rating may suffer as a result due to one type of advance outweighing the other, thus hampering your future financial standing.
- Credit utilization ratio – If you consume too much credit in a short span, it indicates a credit hungry nature and also lowers your repayment capacity. The credit utilisation ratio thus indicates the total percentage of credit already consumed out of the total credit available to you, with an ideal ratio standing between 30 and 50%. A high ratio, too, can thus negatively affect your CIBIL score calculation.
How to check CIBIL score for free?
As per the RBI guidelines, CIBIL is obligated to offer one free credit report check to every individual. Moreover, one can check this score online, by following the steps mentioned below –
- Step 1: Visit CIBIL’s official website.
- Step 2: Fill in the requisite form with necessary details like name, contact number, email address, and others.
- Step 3: Enter your PAN number.
- Step 4: Answer all questions regarding past loans, credit cards, and repayment correctly.
Based on this information, CIBIL provides your credit score instantly. If you want to generate more than one credit report in a year, you can go for subsequent reports against a stipulated charge.
Ways to improve your credit score organically
One can adopt various ways and do several things to improve his/her personal credit score. Understanding the CIBIL score calculation process should give you an insight into how you can approach credit rating improvement –
- Never avail substantial credit, which you may find challenging to repay. Late EMIs or credit card bill payment can hurt your credit score and vice versa.
- If you have availed personal loans in the past, try to avail secured credit options in the future. Such a credit mix is viewed as a positive trait in potential lenders.
- Keep your credit utilisation ratio to a minimum. For instance, if you have availed a credit card with a limit of Rs.1 lakh, ensure you use only up to Rs.40,000 – Rs.50,000 for the existing billing cycle.
- Check your credit report every year and intimate any errors that may crop up in your report for rectification. Although not frequent, CIBIL score calculation may be a result of errors or omissions in one’s credit records.
If your credit scores are high enough and are an existing customer, you can also avail pre-approved offers from lenders like Bajaj Finserv. These offers are available on a range of financial products, including personal loans, business loans, credit cards, and more. You can check your pre-approved offer by providing your full name and contact details.
As a potential borrower, CIBIL score is one of the integral determining factors you should keep in mind and identify if your CIBIL score is getting you down when availing finances. The scores in this scale can dictate the interest rates and amount of funds you can avail as a loan. Additionally, it can also determine whether you are eligible for unsecured and secured credit.
While you may be inclined to stick with your debit card or carry around cash, using a credit card has its own benefits. In fact, with a credit card, you can both save on your spending and gain from a better purchasing experience. While being too dependent on your credit card and using more than you can repay can lead you to debt, prudent use of this tool can improve your financial health. So, if you are wondering if you should go for credit card apply, take a look at its benefits to make the right choice.
Convenience of credit
One of the major perks a credit card brings to the table is that it is universally accepted. This isn’t always true for your debit card. Additionally, credit cards give you increased purchasing power, allowing you to make big-ticket purchases without dipping into your savings. However, be wise when using a credit card as you alone are responsible for its repayment.
Financial security and fraud protection
Having your debit card skimmed, stolen or subject to fraudulent transactions is money stolen right out of your account. This however, is not the case with credit card, and due to that fact lenders provide you with a lot more security when it comes to credit cards. Some lenders such as Bajaj Finserv let you disable your credit card from your smartphone if you ever suspect fraud. Additionally, you also enjoy financial security in the instance that you’ve paid for a service but it wasn’t carried out. Disputing transactions is extremely simple and in most cases the transaction is reversed as soon as you report it.
Rewarding features to help you save
The reward system offered by credit cards is a favourite among consumers simply because of the value it adds to the purchasing experience. Some issuers let you earn points based on the transaction amount or the number of transactions and these points can be then redeemed for exclusive products and discounts. However, it doesn’t stop there. Certain issuers have collaborations with brands and offer additional exclusive deals on purchases made at those stores. For example, Bajaj Finserv RBL Bank SuperCard allows you to save up to Rs.55,000 annually.
Increase in credit score
This benefit of a credit card is especially important to those with a low credit score or without a credit history altogether. A factor that determines your CIBIL score is your repayment behaviour and credit history, and so, you can use a credit card for this purpose. Making consistent credit card bill payments will add points to your credit score and you’ll see an increase in no time! This will help you secure credit in the future on favourable terms.
These are the benefits that speak for the popularity of credit cards. Besides these, several issuers also give you access to exclusive offers through their various collaborations and this can greatly impact your quality of life for the better. This can be in the form of airport lounge access, special reservations and in some cases, even complimentary amenities. You can enjoy all of this and more when you pick the right issuer and one such option is the Bajaj Finserv RBL Bank SuperCard.
The credit card offers on the SuperCard are some of the best in the market on purchases made for travel, food, entertainment and even utilities. You get to enjoy special discounts, cashback offers and all your purchases earn you reward points, which can add even more value to your future purchases. Additionally, in emergencies you can get an interest-free loan for 90 days on your credit limit and even withdraw interest-free cash from credit card for up to 50 days from any ATM. To apply for this credit card online, all you need to do is check your pre-approved offer and view a customised deal and enjoy instant approval.