When you are learning about credit and finances, you may encounter terms like credit score, CIBIL score, and CIBIL report. These terms are important to understand if you are new to the financial world and want to get a loan or credit card to start your own business. These terms are often used in the process of approving loans and credit cards, so it is essential to know what they mean.
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 is a measure of an individual’s creditworthiness, based on factors such as payment history, outstanding credit, and active credit lines. It is used by lenders and banks to evaluate loan and credit card applications. A high CIBIL score indicates a good credit repayment history, making it more likely for a borrower to be approved for credit.
Other characteristics of the CIBIL score are as follows:
- The CIBIL score range is from 300 to 900.
- A score of 750 or higher is considered excellent.
- A score of 700-749 is considered good, while a score of 650-699 is considered fair.
- A score of 550-649 is considered average, and a score below 550 is considered poor.
- An applicant with a low CIBIL score may still be eligible for a loan, but will likely face a higher interest rate on the borrowed amount.
How to Improve CIBIL Score?
To improve your chances of being approved for a loan or credit card, it is recommended that you maintain and improve your CIBIL score. Some ways to do this include:
- Make sure to pay your bills on time
- Keep your credit card balances low
- Avoid applying for multiple credit cards or loans in a short period of time
- Check your credit report regularly for errors and disputes.
- Make good use of your credit utilisation ratio
What is CIBIL Report?
A CIBIL report is a comprehensive document that provides lenders with key insights into an individual’s credit history and credit score. This report is created by CIBIL, a credit bureau in India that collects and stores credit and financial data on individuals and companies. The CIBIL report includes details about an individual’s credit card and loan accounts, including payment history, outstanding balances, and any missed payments. Lenders use this information to evaluate an applicant’s creditworthiness and decide whether to approve a loan or credit card. It is important to maintain a good CIBIL score and report in order to be eligible for credit.
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 free of errors can improve an individual’s CIBIL score. However, a CIBIL report that contains errors or remarks from banks or lenders can negatively impact the score. It is recommended to review the CIBIL report at least twice a year to detect any issues or errors that can be disputed.
Difference Between CIBIL Score and CIBIL Report
A person’s CIBIL score is a three-digit number that reflects their creditworthiness. It is calculated based on their credit history and is used by banks and other financial institutions to assess their creditworthiness before granting them a loan or credit card.
A CIBIL report, on the other hand, is a detailed report that contains a person’s credit history. This report includes information such as their loan and credit card repayment history, the number of credit accounts they have, the amount of credit they have used, and any defaults or late payments they may have made.
While the CIBIL score is derived from the information in the CIBIL report, the two are not the same. The CIBIL report provides a more detailed view of a person’s credit history, while the CIBIL score summarizes this information in a single number.
- 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