A credit score is a 3-digit number ranging from 300 to 900 assigned to every individual who has availed credit. The CIBIL score is considered the standard of all such scores in India.
CIBIL has more than 2,400 financial institutions as members, thus accounting for its wide acceptance. Apart from CIBIL, Experian, Equifax, and High Mark are the three other credit information companies in India providing a credit score.
What is Credit Score?
A credit score determines the creditworthiness of an individual. Lending institutions determine whether a borrower is eligible for a credit based on this score. The ideal CIBIL score for personal loan or a credit card is 750.
What Determines The Credit Score?
CIBIL calculates the credit score depending on an individual’s Credit Information Report (CIR.)
The report contains information like:
- Types of credit availed – loans or credit card.
- Amount of loan.
- Credit card limit.
- Outstanding payment.
- Overdue payment.
- Timeline of delayed payments.
- Settled or written off credits.
- Credit enquiries.
What Factors Influence The Credit Report and Score?
Some of the factors that affect your credit rating and report include:
- Number of applications
Lending institutions perform credit enquiries when you apply for a personal loan or credit card. These enquiries are made to check your CIBIL score and rating. Every loan or credit card application you make is recorded on your credit report. Multiple applications in a short span of time will lead to as many such inclusions on your report and show you as a credit-hungry individual.
Hence, make sure you do not have too many applications to maintain a healthy credit score.
- Application rejections
Your CIBIL rating also lowers when lenders reject your loan or credit card application. There are numerous reasons why a lender may do so including a below-par CIBIL score, application for an unreasonable loan amount. Help yourself with a personal loan eligibility calculator to determine the loan amounts you are typically eligible for.
- Credit limit usage
The credit limit of your credit card is the total amount that you can spend or borrow with it. How much of this limit you utilise also affects your CIBIL score. Generally, keeping the credit utilisation at 30% of the limit will increase the score.
- Credit card payment
Paying your credit card bill in due time improves your credit score.
A credit card statement includes two payable amounts: total and minimum. The total payable amount is the full amount that you owe to your credit card company. On the other hand, the minimum amount due is a particular percentage of the total amount, which can also include interest.
Your credit score will decrease if you pay the minimum payable amount as it means that you are unable to clear all your dues.
- Loan EMI payments
Similar to credit card bill, paying your loan EMIs within the due time also has a positive impact on your CIBIL rating.
Are there any other ways to increase the credit score?
An exceptional way to increase your CIBIL rating is by opting for a secured credit card. Companies sanction these credit cards against a fixed deposit. Hence, you don’t need a credit score to apply.
Another way to improve your CIBIL score is by availing a small personal loan. However, you have to ensure you repay the loan without fail. Timely repayments will help you increase your CIBIL score over time. Do note that a high credit score will help you avail lower personal loan interest rates in the future. You may also avail a higher loan amount and credit limit.
Companies like Bajaj Finserv provide Personal Loans of up to Rs.25 Lakh against minimal documentation and eligibility criteria. Tenors on these loans range from 12 to 60 months.
Bajaj Finserv also brings you pre-approved offers that help you save time when availing loans by making the process straightforward. Pre-approved offers are available not only on personal loans but also on home loans, business loans, and several other financial products and services. Provide only your name and phone number to check your pre-approved offer.