What is CIBIL Credit Score?
A Complete Guide to Understand, Build, and Improve Your Credit Score
Table of contents (toc)
Introduction
In today’s financial world, your credit score plays a crucial role in determining your financial credibility. In India, the most popular credit agency is CIBIL (Credit Information Bureau India Limited). This article explains what a CIBIL credit score is, why it matters, and how you can improve your credit score to access loans more easily.
What is a CIBIL Credit Score?
A credit score is a three-digit number generated by credit bureaus like CIBIL, based on your financial behavior and loan repayment history.
- The score typically ranges from 300 to 900.
- A score above 700 is considered good.
- Higher scores indicate better creditworthiness, making it easier to get loans.
Why is a Good Credit Score Important?
✔️ Faster loan approvals
✔️ Lower interest rates
✔️ Eligibility for unsecured loans (personal loans, credit cards)
✔️ Better financial credibility with banks and NBFCs
Factors Affecting Your Credit Score
1. Credit Checks
- Checking your own score via Google Pay or the CIBIL website is called a soft inquiry, and it does not lower your score.
- But if banks check your score when you apply for a loan (hard inquiry), it can slightly decrease your score. Too many rejections can harm your credit score.
2. No Credit History
- If you have never taken a loan or credit card before, your score might show as "-1", meaning no credit history. This can make it difficult to get your first loan.
3. High Credit Utilization
- Spending most of your credit limit negatively affects your score.
Example: If your credit limit is ₹500 and you spend ₹300, this is a 60% utilization—experts recommend keeping it below 50%.
4. Type of Loans
- Secured loans (car loan, home loan) have less negative impact.
- Unsecured loans (personal or business loans) affect your score more significantly if not repaid on time.
5. High Credit Exposure
- If your total loan amount is very high compared to your income (example: ₹40,000 loan on ₹50,000 income), your score will drop.
6. Consumer Durable Loans
- Loans for mobile phones, TVs, cars, and houses increase your debt burden and affect your score.
7. Being a Guarantor
- If you act as a guarantor for someone and they default, your score suffers too.
8. Loan Settlement
- If you settle a loan by paying less than the full amount, your score drops significantly, making it hard to get future loans.
How to Build and Maintain a Good Credit Score
1. Start Small
- Get a secured credit card (against an FD) if you have no history.
- Use the card regularly for small purchases.
2. Pay On Time
- Always pay your credit card bills and EMIs before the due date.
3. Maintain a Healthy Credit Utilization Ratio
- Don’t use your full credit limit. Stay below 50% utilization.
What Happens If You Have a Low Credit Score?
A low score can make it difficult or impossible to get:
- Personal Loans
- Mobile phone EMIs
- Education Loans
- Medical Loans
In some cases, even renting a house or getting a job in the financial sector becomes difficult.
Final Thoughts
Your CIBIL credit score reflects your financial responsibility. Build a good credit history by spending wisely, repaying loans on time, and maintaining a low credit utilization ratio. This will help you secure future loans effortlessly and maintain strong financial health.
✅ Stay financially disciplined, and your credit score will reward you with better financial opportunities.
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