The Economic Times presents a report stating that almost 74% of the total customers surveyed by CIBIL check their credit score at least twice a year if not more. Out of them, around 29% check CIBIL score range intending to improve it while 28% check to seek credits from financial companies.
Therefore, the need to have a comprehensive idea about CIBIL score is vital as it has a direct impact on an individual’s ability to avail such financial products. Customers need to know about the credit score range and how it is determined to be able to make a better financial decision.
What is CIBIL score?
CIBIL score or credit score is a 3-digit number. The CIBIL score range is from 300 to 900, where a score of 900 is highest. Every individual with a credit history is allotted a score depending upon their repayment history. Consequently, an individual who makes timely payments of EMIs and/or credit card bills will surely have the highest credit scores.
Financial institutions look for a decent CIBIL score of 750 and above before offering a customer with loan options. As a result, customers should always try and look for ways to improve their credit score so that they can avail loans quickly, hassle-free, and with a competitive rate of interest.
Who decides the credit score?
The credit or CIBIL score is computed by the CIBIL Transunion credit bureau, which is a globally recognised authority maintaining the CIBIL report and other such credit-related data. In India, several recognised credit authorities are eligible to calculate the credit score of an individual. The credit score is evaluated for an individual as well as a business unit depending on their past borrowing experience.
How a credit score is computed?
Since different credit bureaus implement distinct algorithms to assign credit scores respective to an individual, the scores may differ slightly depending upon the credit bureau. However, some basic points of consideration followed by each of them include –
- Credit repayment history – Repayment history can have a major impact on the CIBIL score of a customer. Since it is considered as a basis of offering loans, individuals who make timely repayments of debts increase their credit score with each such instance. Contrarily, those who default on a loan and delay in such payments lower their score. Having a low credit score will make financial institutions doubt the repayment capability of the individual in concern.
- Credit type and tenor – Distributing types of advances helps an individual acquire a high credit score. Seeking unsecured credits all the time can have a negative impact on the credit score. Besides, credit bureaus tend to allot higher scores to individuals who have opted for long tenor loans, e.g. – home loans, loans against property, etc.
- Credit utilisation ratio – Credit bureaus take the credit utilisation ratio into account to calculate the credit score. This ratio is the amount of credit a borrower utilises from the available credit limit approved to them. Maintaining a balance between the two helps borrowers get a decent credit score.
- Substantial hard enquiries – In case an individual has made too many credit requests from financial companies, and there have been several enquiries made by financial companies, it may hamper credit score.
Subsequently, considering these factors and making wise financial decisions can help borrowers easily improve their credit score. With improved credit score, availing unsecured finances like a Bajaj Finserv personal loan will be easier for borrowers. CIBIL score is one of the most essential eligibility criteria which lenders consider while approving unsecured loans.
Financial companies like Bajaj Finserv offer personal loans to such credit-eligible borrowers at competitive rates of interest and flexible tenors. They also simplify the application procedure by introducing pre-approved offers on loans. These offers are available on multiple financial products like home loans, business loans, apart from personal loans. You can easily check your pre-approved offer by submitting only your name and contact number.
A CIBIL score of 750 and above is considered as excellent and financial companies willingly provide finances to such applicants at attractive interest rates and other loan terms. Financial institutions usually seek candidates to offer a loan with a decent score within CIBIL score range 700-800. Individuals having a CIBIL score below this range may find their loan application rejected or have to avail finances at a substantially higher rate of interest or at less beneficial loan terms.