When discussing credit and finances, it is common to come across terms such as credit score, CIBIL score, and CIBIL report, among others. However, if you are new to the financial world and want to get a credit card or a loan to start your own business, it is critical that you understand these terms and what role they play in loan or credit card approvals.
This blog will explain in detail about CIBIL score and CIBIL report, as well as the differences between the two.
What is CIBIL Score?
The CIBIL score represents the user’s credit borrowing behaviour. It is calculated using a variety of factors such as the user’s payment history, outstanding credit amount, active credit lines, and so on. Aside from that, the CIBIL score is one of the most important factors in providing a detailed analysis of the user’s credit repayment behaviour. Lenders and banks decide whether to reject or approve a loan/credit card application based on the user’s CIBIL score.
Other characteristics of the CIBIL score are as follows:
- The CIBIL score ranges from 300 to 900
- A score of 750 or close to 900 is considered excellent
- A credit score of 700-749 is considered good, while a score of 650-699 is considered fair. A credit score of 550 to 649 is considered average, and a credit score of less than 550 indicates a poor credit history
- An applicant with a low CIBIL score can apply for a loan; however, he or she will be charged a higher rate of interest on the borrowed amount in comparison to normal credits
How to Improve CIBIL score?
It is recommended that you maintain/improve your CIBIL score in order to be approved for a loan or a credit card. An applicant should do the following to improve his or her credit score:
- Pay off the debt on time
- Avoid making multiple hard inquiries
- Do not leave any outstanding balances
- Resolve errors/comments in the credit report, if any
- Make good use of your credit utilisation ratio
- Keep a healthy balance of secured and unsecured loans
What is CIBIL Report?
A CIBIL report, also known as a Credit Information Report (CIR), is a detailed document that includes information such as the user’s current loans, credit-related information, and other personal information such as the user’s PAN number, DOB, address, gender, and so on. Credit bureaus collect credit data from banks, financial institutions, and lenders to create a detailed credit report for the user.
Besides the user’s personal information, the CIBIL Bureau considers the following information when generating a CIBIL report:
- Loan information and other credit-related data
- Details about the user’s earnings
- Credit card details
- Credit card cancellation details
- Total number of hard inquiries
A CIBIL report that is error-free can improve the CIBIL score; on the other hand, a CIBIL report that contains errors or remarks provided by banks or lenders has a negative impact on the CIBIL score. It is recommended that the CIBIL report be reviewed at least twice a year.A detailed report can assist in detecting issues or errors, which can then be used to file a dispute.
Difference Between CIBIL Score and CIBIL Report
A CIBIL report is generated based on the user’s credit information, debt, loan amount, and other personal details. A CIBIL score is the most important part of a CIBIL report and cannot be generated without a detailed CIBIL report.
Although a CIBIL score is one of the most important factors affecting credit approval/rejection, it is not the only factor considered by lenders and banks when accepting or rejecting a loan application. A high CIBIL score improves the chances of loan approval.
- Pay your bills on time
- Do not conduct multiple hard inquiries
- Avoid leaving unpaid balances
- Make good use of the credit utilisation ratio
- Examine your CIBIL report twice a year
- Set up reminders to ensure that credit card payments are made on time
- If the CIBIL report contains errors, file a dispute
- Maintain a proper balance of secured and unsecured loans
- Poor repayment history
- Outstanding balances
- Delayed payments
- Frequent hard inquiries
- High use of credit utilization ratio
- Errors in the credit report
- Half settled payments