CIBIL Score: Everything you need to know!

The Credit Information Bureau (India) Ltd, popularly known as CIBIL is a credit agency that offers CIBIL score and CIBIL report. Incorporated in 2000, CIBIL is authorised by the Reserve Bank of India (RBI).

What is a CIBIL score?

A CIBIL score is generated by the credit bureau after considering an individual’s detailed credit information. It is a three-digit number between 300-900, 900 being the highest, that represents an individual’s creditworthiness. A higher CIBIL score suggests good credit history and responsible repayment behaviour. Quick loan approvals, low interest rate credit cards, home loans and car loans, approval for higher credit limits are some of the advantages of a healthy credit score.

How is a CIBIL score calculated?

Credit bureaus calculate credit scores by using their own algorithms. Each bureau calculates credit score in a different way. CIBIL scores are calculated on the basis of an individual’s historical financial data of at least 6 months. The data is fed into an algorithm with 258 different variables and each variable has a different weightage. Factors like credit exposure, credit history and credit type are taken into consideration while calculating the CIBIL score.

How to check your CIBIL score for free?

In 2017, RBI made it mandatory for credit bureaus to offer one free credit score and credit report to an individual in a calendar year. You can even check your CIBIL score by heading to the CIBIL website and pay the fees to access your credit report.

How to improve a CIBIL score?

Banks refer to your CIBIL score and take a decision about your loan or credit card approval. Hence, it is important to have and maintain a high CIBIL score. There are several ways in which you can improve your CIBIL score. Here are some of the simple and effective ways in which you can improve your CIBIL score:

• Check your CIBIL score: Make sure to check your CIBIL score at regular intervals, as it will give you an idea about your credit status. You can track your score by getting free CIBIL report from CIBIL.
• Make bill payments on time: Paying your bills on time is of utmost importance, as it helps to boost your credit score. Delayed payments should be avoided and also ensure to pay your credit card bills and home loan EMIs on time for a higher credit score.
• Maintain credit utilisation ratio: Try to maintain a low credit utilisation ratio. This essentially means, do not exhaust your entire credit limit. Until your CIBIL score reaches 750, it is advised to not spend over 50% of your credit card limit.
• Go for a higher credit limit: Increase the credit limit on your credit card and use a lower amount to boost your credit score.
• Don’t close old accounts: A good repayment behaviour reflects positively on you CIBIL score. Hence, avoid closing such credit card accounts that have a decent credit history as it will adversely affect your credit score.