Your credit score or CIBIL score isn’t just a number on paper; it’s a door to the opportunity to qualify you for loans and credit cards. And the higher your score, the wider the lenders open that doors for you. It may sound complicated, but this guide will help demystify the concept at length.
What is the difference between CIBIL Score and CIBIL Report?
Although both the CIBIL Score and CIBIL Report play a significant role in the approval of your loan application, they have a few differences.
How to check CIBIL Score online for FREE?
Follow these steps to check your CIBIL score for free in India:
- Go to the CIBIL official website.
- Create an account with your username and password. Enter your name, mobile number and email ID.
- Enter personal details that include the date of birth, identity proof (PAN Card and Aadhaar number), and address.
- Verify your identity. You’ll receive an OTP to verify your details.
- Submit the OTP to receive your CIBIL Score and CIBIL report.
How is CIBIL Score calculated?
CIBIL Score is calculated by using an algorithm that revolves around loan and credit card repayment behaviour of an individual. The following 6 key factors are taken into consideration while calculating your CIBIL score:
Importance of CIBIL score for
Personal Loan & Credit Card Approval
CIBIL scores play a crucial role when it comes to taking loans. When you apply for any kind of a loan, the first thing the lender does is download your credit report to access your creditworthiness.
If your CIBIL score is high, the odds of you getting a loan are high. You can also negotiate better loan terms and bargain on some fees and charges.
But if your CIBIL score is low, your chances of getting a loan approved are likely to be low. However, if you meet other loan eligibility norms, the lender may grant you the amount you need.
How to Maintain & Improve CIBIL Score?
If you happen to have a low CIBIL score or bad payment history, all is not lost. The good news is that this record doesn’t stay on your credit profiles forever. You can still repair your credit history and improve your credit score. Also, if you happen to have a good CIBIL score, you need to maintain it. Just follow the following tips to get on the path to better credit health:
- Make your payments on time.
- Limit your credit utilization ratio.
- Avoid multiple loans or credit card applications.
- Try not to exceed 30% of your available credit.
- Clear or consolidate your debt.
- Limit your number of credit cards.
- Diversify your credit portfolio.
- Check your credit report for errors.
Credit Score, Credit Report and Credit Rating?
These terms are very closely related, and it is easy to get confused. The following points should help you differentiate between them. Besides these, there is another related term called vantage score, which is a credit scoring method.