Credit cards are widely used nowadays because they allow people to buy now and pay later. Similarly, loans are a saviour when there are insufficient funds to start a business, buy a new home, or for other purposes. Credit, in any form, is simply a means of allowing borrowers to meet their financial expenses for the time being while having the option to repay later.
While both types of credit, whether credit card or loan, are beneficial to borrowers in the long run. They necessitate extensive documentation and approval procedures. Aside from providing all required documents, a good CIBIL score is at the top of the list of eligibility conditions for a loan/credit card. But what exactly is the CIBIL score? How can you find out what your CIBIL score is?
Let’s find out the answers to these questions in the section below!
What is CIBIL Score?
A CIBIL score is a three-digit numeric summary of the user’s credit history. The score is determined by a number of factors, including the user’s payment history, late payments, outstanding amount, and so on. Before rejecting or approving a loan application request, lenders, banks, and financial institutions always look at the user’s CIBIL score.
Here is everything else you need to know about the CIBIL score:
- The CIBIL score ranges from 300 to 900
- A CIBIL rating of 900 or higher is considered excellent, while a CIBIL rating of 650 to 750 is considered fair
- Ratings less than 650 are regarded as poor
- A good CIBIL score reflects a user’s responsible credit payment behaviour
- People with a good CIBIL score are more likely to be approved for a loan and/or credit card
How To Check CIBIL Score?
You can check your CIBIL score by logging in to the official CIBIL website or by using the Paytm mobile application. All you have to do is follow a few simple steps-
- Log in to the Paytm mobile app
- Go to ‘Loans and Credit Cards’
- Select ‘Free Credit Score’
- For free, you can check your credit score
What are the Factors Affecting the CIBIL Score?
Some of the factors that have a negative impact on the CIBIL score are as follows:
- Payment history that is irregular
- Credit balances that have been delayed and/or are still outstanding
- Higher use of credit utilization ratio
- Multiple hard inquiries within a particular time period
- Mismanagement of secured and unsecured loans
- Comments in the Credit report
How To Improve CIBIL Rating?
There are numerous factors that have a negative impact on the CIBIL rating, further complicating the process of obtaining a loan or a new credit card. As a result, it is critical to identify the problem and then work to resolve it in order to avoid having a credit application rejected.
The following are a few basic practises that should be followed religiously in order to improve one’s CIBIL rating:
- Make on-time credit payments
- Make all of your credit card payments by the due date
- Always pay off your credit card balance in full. Do not ignore any remark on your credit report
- Maintain a healthy balance of secured and unsecured loans
- Don’t make multiple hard inquiries within a smaller period of time
- Use the credit utilization ratio wisely
- Use your old credit card for as long as possible (the past payment history helps in building a credit score)
- Repayment history
- Credit utilization ratio
- Duration for availing credit
- Credit mix
- Credit inquiries