CIBIL score: Here’s why it plays a crucial role in your loan application

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When it comes to applying and sanctioning loans, CIBIL score is the most important parameter of an individual. It defines whether you would get a new loan or not. It also determines the interest rate that you would be charged, especially when it comes to home loan, personal loan or car loan. This score, which generally varies between 300 and 900, reflects your past repayment credentials. Lenders usually conduct a credit score check when they receive any loan application from an individual to ascertain the risk involves with the loan.

Equifax, Experian and CRIF High Mark Credit Information Services are there to calculate the CIBIL score apart from TransCIBIL.

According to a TransCIBIL study, almost 4 out of 10 persons are rejected due to low credit score when applying for credit cards, home loan, car loans, and other financial products.

Factors influencing score

CIBIL score generally depends upon multiple issues. Each factor has equal weightage to calculating the CIBIL score. The factors are:

Payment history: Delaying payments or defaulting on your EMI payments played a huge negative effect on the credit score.

Mix of credit: A balanced credit score includes both unsecured and secured loans. This mixture of different types of loan influences the credit score in a positive way since it indicates that an individual is careful about his/her finances very much.

Multiple enquiries: Inquiries about multiple loans can also have detrimental effect on the score since it signifies that existing loans might add up.

Credit use: A high credit usage indicates increasing debt which can significantly affect the CIBIL score negatively.

There are three agencies in the country that calculate CIBIL score. But TransUnion CIBIL is the leading agency. TransUnion CIBIL is one of India’s oldest credit information companies, which collects data on individuals from banks and other financial institutions. Based on this information, every person’s Credit Information Report (CIR) is created accordingly.

The information under your CIR’s Accounts and Enquiries sections makes the majority of impact on your CIBIL score.

Good CIBIL score

A good CIBIL score always gives you an edge over others to get a fresh loan. Lenders usually consider CIBIL score of 750 or higher as a good score. A score like this helps you get a competitive rate of interest on your loan, it also helps you access credit faster, and allows you to get a higher loan amount too.

CIBIL score range:

— Excellent: 900 to 800

— Very Good: 799 to 740

— Good: 739 to 670

— Fair: 669 to 580

— Poor: 579 to 300.

Any person having credit score above 620-630 is fair enough. But to get a quick loan sanction, or credit card, the score must be between 730 and 900.

How can you check your CIBIL score?

You can check your CIBIL score online. All you have to do is visit a website of a financial service company, fill the details in the ‘Free CIBIL score calculator’ and get the estimated score.

Besides, one can always get your credit score free in a year at CIBIL’s official website by following some simple steps by paying a token amount of money.