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The CIBIL Score measures the impact of your financial decisions, meaning it reflects every financial move you make, whether that’s taking a loan, swiping your credit card, or paying a due bill. Let’s attempt to understand the significance of this 3-digit number and what it indicates for your financial future.
To start with the basics, the cibil score status is like a school grade, except for your financial performance. It demonstrates how responsible you are with borrowed money. This number falls within the range of 300 to 900, and the higher it is, the better. Lenders typically hold a CIBIL Score of 750 or more in high regard.
So, What Makes Up Your CIBIL Score?
It isn’t a number that’s pulled out of thin air. In fact, there are 5 key components that are considered when TransUnion CIBIL, India’s oldest credit bureau, calculates your CIBIL Score. These are:
- Payment History, or whether you’re paying your dues on time consistently
- Credit Utilisation Ratio, or the percentage of your available credit you’re using
- Credit Age, or the length of your credit history
- Credit Mix, or how diverse your credit portfolio is
- Credit Enquiries, or how often you’ve been applying for credit within a period of time
How Does Your CIBIL Score Impact Your Financial Success?
Your CIBIL Score determines your eligibility for credit products and services and also plays a pivotal role in your borrowing experience.
Lenders consult your CIBIL Score to understand the potential risks involved in allowing you to borrow their money. A high CIBIL Score tells them that you have the reputation of a reliable borrower, which makes them more likely to approve your application for credit and offer you favourable terms such as low-interest rates and longer tenures.
However, a low CIBIL Score is like a red flag for lenders because they see you as a risky borrower who has possibly missed or defaulted on payments previously. This means they’re less likely to lend you the finances you require. Even if they do approve your application for credit, they might offer you a smaller sum than you had applied for, a higher interest rate, or a shorter tenure, all of which would prove burdensome. Further, they might saddle you with harsher conditions to offset their risks, such as requiring assets as collateral or a co-signer.
Read Here More: Will going debt-free impact my CIBIL Score?
How To Boost Your CIBIL Score?
Building a good CIBIL Score is like training for a marathon. It takes time, effort and consistency. Here are some steps you can take if your CIBIL Score needs a little help:
- Always pay your bills on time and in full
- Avoid maxing out your credit cards or using more than 30% of your available credit
- Maintain old credit accounts in good standing
- Acquire a healthy mix of credit, including credit cards and loans (secured and collateral-free)
- Limit your credit applications and spread them out over time
- Regularly monitor your credit report to catch errors and inaccuracies
How To Check Your CIBIL Score?
One of the myths floating around about CIBIL Scores that needs clearing up is that checking your own score will bring it down. That just isn’t true! Checking your score is a ‘soft enquiry’ and is like a regular health checkup for your credit, very much encouraged.
Credit information companies like cibil score transunion offer you a free credit report check annually that you can easily avail of by logging into their website with your name, PAN information, and an OTP for authentication purposes. Once you receive your CIBIL Report, you can check your CIBIL Score on it.
However, if you’re looking to check your CIBIL Score on a regular basis for free, consider opting for the Bajaj Finserv Credit Pass, your go-to toolkit for credit health management and improvement. Not only does it offer you free monthly CIBIL Score checks, but also provides you with real-time insight into your credit health report and credit factors. With interactive tools, such as the Credit Score Simulator and EMI Calculator, you can make informed decisions about the best way forward. Sign up today and enjoy the first year at zero cost*.
Your CIBIL Score matters greatly when it comes to opening doors to better loan offers and credit opportunities, so remember to focus on actionable steps to boost your credit score and build a stronger financial future with the Credit Pass.
