The loan market has changed a lot in the past 5 years. It is now extremely important for a borrower to keep tabs on the credit report issued by a widely accepted credit reporting agency like CIBIL (Credit Information Bureau (India) Ltd) to get a loan. It is now mandatory to maintain a good credit score for getting all types of borrowings from banks, whether it is a home loan, car loan, personal loan or business loan.
What is a Credit Score by CIBIL?
A CIBIL credit score can be explained as a 3 digit numeric outline of your credit history. The score is calculated by taking into account your complete borrowing details, history, repayment pattern and default instances (if any) etc. It is scaled in a range of 300 to 900 points. The higher the points i.e. close to 900, better will be the chances to get the loan from a lender. A good score is important to get a loan with ease. Lower score (close to 300) indicates a discrepancy for borrowings in the past.
Why CIBIL credit report is important?
A CIBIL credit report contains all the details pertaining to your borrowing history and its repayment discipline. CIBIL credit report is very important nowadays because:
- It contains your past and present credit history.
- Banks and FI’s allow loan to a borrower on the basis of CIBIL credit report. A good credit score helps borrowers to get loans easily from banks.
- You can inculcate financial discipline by analyzing the credit report.
- It helps borrowers to avoid the debt trap.
- You can stay away from extreme financial leverage by analyzing the credit report properly.
How to Analyze Credit Score?
CIBIL’s credit score ranges from 300 to 900 points. A higher score close to 900 reflects good credit history i.e. lesser defaults in payment, no over leverage and disciplined repayment. A lower score close to 300 reflects bad credit history. Banks prefer lending to borrowers with high scores and 750 to 800+ points is considered as a good score.
What affects the Credit score?
Following are some points that can affect your credit score:
- Cheque bounce in the past
- Irregularity in Loan repayment
- Default in repayment of Credit card bill
- Many unsecured loans such as personal loan.
- Multiple applications for an unsecured loan can also be negative for credit score
- Default as a guarantor
How to Keep Tabs on Your Credit Score?
It is very important to keep tabs on your credit score, especially if you are aiming for a loan anytime in future. Following are some key points to keep a check on the credit score:
- Never default on EMI payment or repayment of credit card dues.
- Don’t over leverage your financial position.
- Avoid multiple unsecured loans on a single profile
- Closing a loan with a regular repayment shows that you are a disciplined borrower, so set a due date reminder on your mobile to avoid delay
- If you need multiple loans for various purposes, then try to distribute the same by borrowing in the name of other family members
- Never forget to take a “ No Dues Certificate” while closing a loan. It is also important to check the same in an updated CIBIL report after the loan is closed.
How to Check CIBIL Credit Score
Following are the steps to get CIBIL Score:
- Fill online form by visiting the CIBIL website and then click on “Buy your credit score”.
- Pay Rs 470
- Fill Authentication details
- Get CIBIL score within 24 hours in your mail id.
While filing the online form, you would be required to provide details such as name, date of birth, contact address and phone number, information related to loans taken in the past. After completing the form and paying Rs 470/- using your credit card, online banking or debit card, you need to fill the authentication details. Here, you would be given 5 questions based on your credit history and you have to answer at least 3 to get the authentication done. After getting the authentication done successfully, you will get the CIBIL score through e-mail within 24 hours. If you fail to get an authentication, you can send the hard copy of the form along with generated id and address proof to CIBIL. After verifying all the documents, CIBIL would send the credit report to your address.
Your loan account may have dues of paltry amount only, but it can thwart your plan to raise bigger loans. A bad credit report is not acceptable to any of the lending institution while you apply for a loan. It is a very tedious and time taking process to improve the credit score once it is distressed. CIBIL is expected to launch a real time update of credit score through an SMS alert in coming days, it would further help you to keep a check on your credit profile. It is very important to say “no” to products like credit cards and personal loans, unless you really need them!!!