The Credit Information Bureau Limited is the first credit information company in India which came into existence in August 2000. If someone has to apply for any form of credit, then they can get a home loan, personal loan, car loan or even a credit card, in order to determine if that individual is eligible for these credits the CIBIL information comes into use. The banks can also give the applicant’s credit rating from the CIBIL score to decide on whether or not you qualify for the same.
When anyone applies for any form of credit, be it a home loan, personal loan, car loan or credit card, the banks get the applicant’s credit rating from CIBIL to ensure the person’s qualification for a loan or not.
Then the question may arise “How it works and how CIBIL can take all the credit information to the banks?”. The answer to that is mainly the details about repayment of loans done with credit cards. CIBIL provides this information in the range between 300 and 900. If scores are 300 or below that, then the credit rating is referred to be bad to get loans.
CIBIL also maintains a history of payment behaviours, which shows a default on a payment. The recorded history will show your payments, if any late payments are found that it be referred to as default
This service has not been created to ensure the rejection of credit but is a service that aims in reducing bad credit and, as a fringe benefit, also enables borrowers to install certain habits that can not only lead to a good credit score but can sometimes teach sound financial planning.
Keep The CIBIL Score Good
Usually, you have to meet the criteria of age like producing your income slip for a loan or a credit card or the application will get rejected, even if the CIBIL score is not apt. The only way to prevent any such situation is to inculcate certain habits that will ensure that your CIBIL score is not negative.
Payments on Time:
You should begin by making timely payments is also considered the most preferred payment. If payments are initiated on time it will also indicate that you are responsible persons handling your credit score responsibly. In case payments are made on time it will show a responsible attitude towards dues and that in return will show a credit score in a good position. Credit card or loan payments not made on time then it indicates a lack of proper financial planning and can bring down the credit scores.
Finish payments For Credit Cards:
When you have two options for every credit card holder and when the bill arrives, the first option is to process the payment in one go and another is to make the minimum payment as indicated by the bank. Hence, you should follow any of these options to avoid the image you as a customer financial management is not good.
Earn More, But Spend Less:
Even if you start earning more and spending less doesn’t mean that you always have to work on understanding ways to grow only your earnings. Only if your spending prospects increase than earning needs will also boost, then eventually your need can lead to the need for more credit. Hence, to avoid such a situation creating an emergency fund is a way to avoid credit for smaller things.
If you have taken a loan or own credit cards, then you should make all the payments. .Missing your payments, it will be identified as a negative mark in your credit history that brings your score down and creates a hindrance for you to get further loans.
Don’t Apply For Multiple Credit:
Applying for two many loans can make you a credit-hungry person in front of lenders. For every credit you take your cibil score comes down a bit. The apt thing you can do is to not apply for a loan till you actually need one otherwise they will lead to an unnecessary impact on the score and cibil overall
Keep The Borrowing Balanced:
Have a balance in the borrowing shows a healthy mix in loans. Taking a home loan and also a personal loan, along with a car loan, etc. This helps to make a better status if there is too much-unsecured credit, personal loans or credit card debt can be a good mix if you have duly cleared all the payments, it makes future lenders cautious about granting loans.
Don’t Close Credit Cards:
It might also seem that not closing cards can get you into trouble with credit histories but the fact is that if you close all your credit cards then you won’t have a source to get a history especially when you need to take out a loan. A ideal thing to do is to take the card and use it very wisely.
Also Read: Top 5 CIBIL Score Improvement Factors
Factors That Affect Your Credit Score
The financial behaviour has to be consistent as it accounts for 35% of your credit score. Missing or delaying payments will affect your credit score negatively.
A longer credit history enables lenders to take a good decision on if you have the ability to repay the loan. So, they advise that you should avoid removing or deactivating old accounts from your credit report as the age of your credit history accounts for a good 30% of the credit score.
The number of applications an individual avail will have an effect on your credit score
Steps To Improve Your Credit Score
The Credit Limit:
Other than paying your bills timely, you should also find ways to boost your credit score by requesting your credit card to increase your credit limit. Increasing your credit limit, should not only have about 30-40% as it suggests you are responsible for handling your credit.
Do Not Close Old Accounts:
As discussed earlier you can also remove your old account, as it can negatively affect your credit score, by reducing a good credit history. Usually, the records of payment should is present in your report as they help in improving your score.
Credit Score Monitoring:
Monitoring your credit score time-to-time enables you to know the state of your credit status which can give you the opportunity to work on it.
The terminology of banking makes repetitive usage of the terms CIBIL score and CIBIL report; when customers look to seek credit from banks. Both inter-related can easily affect your credit. Analysing a CIBIL score as well as CIBIL report by banks before they lend credit to customers.
What is A CIBIL Report?
A credit report is a detailed understanding of your credit history and details like current balance, loan amount, history of payment, credit limit, account type, account status, and payment history. Usually , it can also consist of your credit score. So, collecting credit report by credit bureaus in the country after collecting data from various authentic sources and companies. There is overall of four credit bureaus in India viz; TransUnion (CIBIL), Equifax, Experian Credit Information Company and High Mark Credit Information Services. All the credit bureaus is under the R.B.I. Each credit bureau will have its own algorithm to calculate a credit score depending on various factors.
A CIBIL report also known as a Credit Information Report an amalgamated record of your credit and loan information. A credit report usually contains not just financial information but also details like PAN number, name, address, gender etc. CIBIL report is a necessary document that can track your credit data. A CIBIL report by CIBIL through customer credit data from different banks and lending entities. Formatting and processing of the data in the final credit report in detail.
Every Information Commonly Mentioned Below Is Included In Your CIBIL Information Report.
- Personal information – Name, Address proof, Age, etc.
- Information of employment with details of income.
- Details and types of loans availed in the past, ongoing loans and their subsequent repayment timelines
- Defaults on loans.
- Loan settlements.
- Credit cards incorporate details for all Credit cards held by you.
- Credit card bill payment defaults.
- Enquiries made are done through various loan providers
- Credit score, which is an important part of your credit report
Customers usually borrow their credit reports once every year to check their records and correct any discrepancies. Credit reports can be sought by applying online with CIBIL. These reports and scores are accessible to customers at a fixed price. Also, these reports can be analyzed by customers for improving their credit scores.
Hence, a credit score is a pointer to your creditworthiness whereas a credit report is a detailed report of your credit behaviour over a considerable period of time.
CIBIL score or credit score is a numeric statement that is used to signify the creditworthiness of an individual. CIBIL scores are based on processing loan and credit-related information that is sourced from lenders registered with CIBIL. Credit bureaus use different parameters to arrive at the final credit score of a customer. Also, information can show your repayment history of credit card bills, credit utilization information and details about the number of secured and unsecured loans availed by you. So, a credit score lies in the range of 300-900. Usually, a credit score of 750 is a good CIBIL score. So, anything below that does not reflect well on the creditworthiness of a customer.
CIBIL is an abbreviation for Credit Information Bureau India Limited. CIBIL is the only prominent credit information company in India. That collects and maintains customer data that pertains to loans and credit. The data is sourced on a regular basis from member institutions mostly banks and other financial institutions.
The credit-related data of different customers are then processed individually to make credit reports for every customer and to deduce the final credit score for each one of them. These credit scores are then provided to banks and other lending institutes for use in sanctioning loans.
You should not ignore the significance of a healthy credit score as it is the gateway that brings you closer to your personal goals of owning a house or a car. A k also helps you get a credit card which offers you financial independence. Let’s dive in and learn more about credit scores and credit reports.