Are you thinking of getting a loan approved? Even if not, having basic financial knowledge is essential for all individuals. CIBIL and credit scores can make or break your dream of getting a new car, or maybe a house, or for any purpose you are thinking of getting a loan. Let us help you brush up on some questions associated with CIBIL and credit score.
Top FAQs About CIBIL and Credit Scores
1. What is a Credit Score?
A credit score is basically a numeric representation of your creditworthiness. In simpler words, it shows how sincere an individual is while repaying the loan. This score summarizes your credit history in a 3-digit number. For example, if an individual constantly defaults on the repayment, then the credit score automatically goes down. While someone who repays the loan on time is awarded a high credit score.
2. What is a CIBIL score?
The credit score, which shows the creditworthiness of the individual, is awarded by certain recognised agencies. One such agency is CIBIL (Credit Information Bureau (India) Limited), which is licensed by the Reserve Bank of India (RBI) and is calculated by TransUnion CIBIL. The 3-digit score assigned by this agency is called the CIBIL score.
3. What is a good CIBIL score?
A good CIBIL score ranges between 750 and above. The chart below gives a clear idea about the score and how likely it will affect the process of taking out a loan.
CIBIL Score Ratings:
| CIBIL Score | Rating | Remark |
| 750 – 900 | Excellent/Good | High creditworthiness; preferred by most lenders |
| 700 – 749 | Good | Qualifiable for loans, albeit interest rates can differ |
| 650 – 699 | Fair | Loan approval is likely, but with increased interest |
| 600 – 649 | Poor | Limited access to credit; might have to raise score |
| Below 600 | Very Poor | Increased risk; loan applications are most probably to be declined |
Also read: 6 Best HDFC’s Credit Cards Are Insane – Cashback, Travel & Shopping in One Swipe!
4. What is the difference between CIBIL score and Credit score?
The credit score is the number representing the creditworthiness of an individual. There are multiple agencies that do this task of monitoring and calculating these scores. The scores calculated specifically by CIBIL are called the CIBIL score. Summarizing, every CIBIL score is a credit score, but not every credit score is a CIBIL score.
5. How to improve a Credit score?
- Clearing EMIs and credit card dues in time
- Limiting the use of available balance to 30%
- Maintaining a certain gap between loan applications.
- Avoiding multiple loan applications within a short time period.
- Have a balanced mix of secured (house/car loans) and unsecured (credit cards) credit
- Analysing the credit report frequently and taking measures to rectify the mistakes
6. Why is a CIBIL score required?
A CIBIL score is beneficial for both the borrower and the lender. A good score is proof that the person is a low-risk borrower. It also helps in increasing the credit limit, along with negotiating a lower interest rate.
7. Why is a credit score required?
A credit score helps the moneylender entity to know if the borrower is creditworthy or not. An ideal credit score ranges between 750-900. This score makes the whole procedure of borrowing money easy and fast for both parties. It also gives the buyer the opportunity to negotiate lower interest rates. Another benefit of a higher credit score is that it helps in raising the credit limit higher.
Written by Tanya Kumari
