There is the least chance that you have never heard about this term ‘CIBIL score’. It is one of the crucial parameters that decide one’s eligibility for a loan. You might have heard some people saying that poor CIBIL score led to the rejection of their loan. Let us talk about CIBIL score in detail.
TransUnion CIBIL is a credit information company that maintains the credit files of the individuals and companies in India. It captures information through PAN number and other personal details of the individual/company. Through those information it generates a report that tells about the creditworthiness of an individual or a company.
It is actually a credit score generated from the credit history of a person. The repayment track record of one’s previous loan decides the score.
The score tells the following details about a person,
A loan application file is immediately rejected on discovering that the CIBIL score of the loan applicant is poor.
The poor CIBIL score is often the result of the following things:
The CIBIL score starts from 300 and ends at 900. Depending on your credit performance your score will lie between these two numbers. The meaning of the scores is as follows;
The credit score of any loan applicant plays a major role for the bank to decide whether he/she deserves the loan or not. It is the easiest way to know a loan applicant’s behavior towards repayment of the loans. It tells how responsibly he/she takes the obligation of paying their debts. How financially disciplined they are. A personal loan is an unsecured one, therefore CIBIL score becomes an important decision maker for your loan application.
It is possible that you may not have a credit score at all. It happens when one has never taken a loan before. Someone who has recently become financially independent and capable of applying for a loan will obviously not have any credit history. And hence no credit score as well.
But is that a problem? If we solely talk about personal loan, then yes, it is a problem. A personal loan is given on the basis of your income. How much you earn? And how steady the income is? Having a loan history clears all sort of doubt about your loan repayment intentions and hence helps banks to take a decision. If you are new in this, the lending institution will certainly have some doubts.
What to do in such a situation?
If you do not have a history, create one. There are some simple ways through which you can create your loan history.
Are you already having a loan but concerned about how to maintain a good score? It is a matter of concern so that you do not face any problem while applying for a loan in the future. There is nothing much difficult to be creditworthy. All it takes is discipline. Ensure the following points to be a worthy borrower
If you have a poor CIBIL score then it does not mean that you will never be able to get a loan in your life. You can restore the faith of financial institutions in you. The ways through which you can do it are;
There is nothing unusual in CIBIL score being negative. The person with no credit history has a negative CIBIL score. The score is generated only on the basis of one’s behavior or discipline towards loan repayment. If one has never taken any loan in his life then the CIBIL score will show the negative figures.
2. Can one improve a poor CIBIL score?
Yes, but it will take some time. You can recreate a new credit history for yourself. The easiest way to do so is by taking a credit card or a consumer loan. Do the timely repayment of the credit or EMI and avoid late payment. It will be recorded and will gradually improve your score.
3. Is it necessary to have a good CIBIL score to apply for a loan?
Yes, especially when you are applying for an unsecured loan your poor track record of loan repayment in the past will hamper your reputation enough to get your loan rejected.
4. What if my CIBIL score was affected by the lending company’s fault?
It does happen sometimes when the bank has the standing instructions to transfer the EMI amount to the loan account. The bank may miss doing so making you liable to late payment charges and in turn hampering your credit score. A letter of apology or a NOC can help you avail loan despite having a poor CIBIL score.
5. How often the CIBIL score is updated?
Ideally, the CIBIL score is updated as soon as the bank sends an applicant’s report to the credit agency. It is usually done on monthly or fortnightly basis. Therefore, we can say that CIBIL is updated in every 15 to 30 days.
6. How often should we check our CIBIL report?
We should only check our CIBIL once in a year or before applying for a loan. We must avoid frequently checking our CIBIL score.
7. How much score is considered good for a loan?
The best CIBIL score is 750 and above. It is the most ideal score for an applicant to be eligible for a loan. However, the applicants with a CIBIL score between 500 to 750 can also avail loan if the lending institution is ready to take a call.