If there is one number that is very important in the world of finance, it is the CIBIL score. An individual's CIBIL score is also sometimes called the credit score. As the name itself tells, the CIBIL score is a significant number that reflects the person's entire credit history. This credit history includes each and every detail, such as how many credit enquiries they have made in the past, how many of their loan applications were approved or rejected, how timely they pay their dues, their debt-to-income ratio, how balanced their secured and unsecured credit is, etc. Based on all these factors, four Credit Information Companies (CICs) in India - TransUnion CIBIL, Equifax, Experian and CRIF Highmark - calculate every one's CIBIL score. The CIBIL score is of extreme importance, and one must take all possible measures to build and maintain the highest possible CIBIL score. Let us explore what is a good CIBIL score and what are the Benefits of Good Cibil Score in more detail:

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What is a Good CIBIL Score?

There is no specific number that is considered to be a good CIBIL score by all banks and financial institutions. Each one has its own requirements. However, most financial institutions and lenders accept a generally accepted division of the CIBIL score ranging from poor to excellent.

1. Poor CIBIL score: If a person's credit score is below 580, most lenders will view it as a poor CIBIL score, and the person will find it extremely challenging to get loans and other forms of credit. It is not possible to have a score below 300. That would mean that a person has no credit history at all. This can happen with students and people who are very recently employed.

2. Fair CIBIL score: If someone's CIBIL score falls between 580 and 669, then they have a fair CIBIL score. A fair credit score requires a lot of improvement and is seen in a negative light by most banks and lenders. It puts the individual in a difficult position, and they find it extremely challenging to approve their loan and credit card applications.

3. Good CIBIL score: A score between 670 and 739 is considered to be a good credit score. Most banks and lenders consider people with such a credit score eligible for a loan and/ or credit card.

4. Very Good CIBIL score: An individual is seen to have a very good CIBIL score if the number falls between 740 and 799. Such a score puts the person in a highly beneficial situation where they can be assured of getting their credit applications approved (given that they meet all other criteria as well) and also enjoy some additional benefits.

5. Excellent CIBIL score: A score above 800 is the best CIBIL score that a person can have. It shows lenders that they have been very responsible in handling their finances and credit in the past and can be entrusted with more credit. Such people not only get their credit applications approved easily but also get access to exclusive offers. They also tend to enjoy lower interest rates and a sanctioning of a higher loan amount itself.

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Why are the Benefits of Good CIBIL score?

You now know what is considered a good CIBIL score and also know what benefits you can enjoy if your CIBIL score is on the higher side. However, you must be fully aware of the benefits of having a good CIBIL score to take the necessary measures and improve your credit score.

1. Get Loan Applications Approved Easily: A person might need a loan for a number of different reasons. There are home loans, business loans, car loans, personal loans, etc. However, only some people's loan applications get approved by lenders. Amongst other factors, their CIBIL score also matters a lot. Banks provide loans to people with good credit scores because they show that the applicant is worthy of getting credit and can be trusted to repay the dues on time. A CIBIL score, therefore, decides the creditworthiness of a person. A poor CIBIL score tells lenders that the applicant has been financially irresponsible in the past. This increases the risk of default payments, and lenders avoid giving their money to such applicants.

2. Enjoy Lower Interest Rates: A good CIBIL score is not only essential to get a loan but will also help you get the loan at lower than usual interest rates. The higher your CIBIL score is, the more readily lenders will negotiate lower interest rates with you. This is highly desirable because the lower the rates of interest are, the easier it is for you to pay off the loan. It will also help you avoid late payments and default payments.

3. Enjoy a Higher Loan Amount: It is obvious that the more a lender trusts your ability to repay the loan, the higher the loan they will be willing to sanction. This trust is built by having an excellent credit score because it is a sign that you have behaved responsibly with your available credit in the past and you have a habit of paying your dues on time regularly. A higher loan amount is beneficial because it allows you to spend more freely and fulfil larger goals. For instance, if you get a loan to purchase a home with a larger amount, you can buy a bigger home than you initially planned.

4. Longer Loan Tenure: Another amazing benefit of having a good CIBIL score is that banks might provide you with a longer loan tenure than usual. A loan tenure refers to the time a borrower is given to repay the loan and the interest amount. The longer your loan tenure is, the smaller your EMIs or monthly instalments are. This makes it convenient and less burdensome to repay the loan. Most lenders consider A longer tenure risky, butt they are willing to provide it to applicants with a high CIBIL score since they are seen as highly trustworthy.

5. Be Eligible for Credit Cards: Just like a good CIBIL score is a necessity for getting your loan applications approved, it is also a great help in getting a credit card. We all know how helpful credit cards are when it comes to shopping and spending on various things. Credit cards make spending easier and even more rewarding. Using a credit card for your purchases gets you special discounts, beneficial rewards, redeemable reward points and exclusive offers as well. Banks prefer giving credit cards to people whom they trust to handle them responsibly. A CIBIL score also reflects your credit card usage in the past. If you have a good CIBIL score, banks offer you credit cards more readily and easily approve your applications.

6. Enjoy Additional Credit Card Benefits: Not every credit card holder gets to enjoy similar benefits. You can enjoy some exclusive benefits if you have a very high CIBIL score. For instance, you might be able to get a higher credit limit, which in turn increases your spending power. You might also be given access to limited offers and special discounts while making various purchases. A better CIBIL score, therefore, also ensures a better credit card experience.

Read More:: How A High CIBIL Score Can Slash Your Interest Rates

How to Improve Your CIBIL Score?

Now that you know the wonderful benefits of having a good CIBIL score, you might also be wondering how you can get a high and excellent CIBIL score. Yes, it is possible for you to work on your CIBIL score and improve it. We will tell you certain things you can do to get a high CIBIL score.

1. Make Repayments on Time: The first and foremost requirement for building a high CIBIL score is to pay your dues on time. If you pay off your debts late or default on your payments, it will show up negatively in your CIBIL report and lower your credit score. It is of the utmost importance that you stay regular and punctual with all your payments, be they loans, credit cards, or EMIs.

2. Don't Enquire About Loans Very Often: When you make too many loan enquiries, you are telling lenders that you are highly dependent on credit. This is naturally seen in a negative light by them. These are known as hard enquiries, and you should keep them to a minimum. Therefore, it is advised that people make credit enquiries only when needed. Also, loan rejections bring your CIBIL score lower. So, the fewer enquiries you make, the fewer rejections you will face.

3. Pay Attention to Your Credit Utilisation Ratio: The credit utilisation ratio refers to how much of your total available credit you use. If you have a low credit utilisation ratio, it means that you are not very dependent on credit. Lenders prefer financial stability, which helps you raise your credit score. To maintain a low credit utilisation ratio, try to keep your available credit high and credit usage low.

4. Do Not Settle Your Loans: Loan settlements are detrimental to your CIBIL score. When you settle a loan with a lender, what does it tell you? It tells that you have been unable to repay the loan and it causes your CIBIL score to go lower. Therefore, always try your best to repay your loans fully and on time.

Read More:: How To Read Your Credit Report

Conclusion

A good CIBIL score brings in lots of benefits for an individual. It makes them eligible for getting loans and credit cards that increase their spending potential. Not only does it make it easier to get their credit applications approved, but it also helps them in getting additional benefits. When people with high credit scores get loans, they also tend to enjoy greater negotiation power. This means they can get a higher loan amount sanctioned, lower than usual interest rates and even a longer loan tenure, making it easier to pay off the loan. Even with credit cards, a good CIBIL score makes you eligible and brings advantages such as higher credit limits, special offers, amazing discounts, etc. Since a good CIBIL score is the gateway to such wonderful benefits, you must take the necessary steps to keep building the highest possible CIBIL score and also maintain it.

Frequently Asked Questions (FAQs)

1. Is 850 a good CIBIL score?

Yes, 850 is a wonderful CIBIL score. With such a high score, you will be eligible for loans and credit cards and enjoy favourable loan terms.

2. Can I change my CIBIL score?

Yes, you can change your CIBIL score, but it will not happen instantly. When you adopt good habits for a period of time, your credit score will increase gradually. For instance, make it a habit to pay your dues on time, keep your credit utilisation ratio low, have a balanced credit mix, make minimum credit enquiries, etc. All this will result in a high CIBIL score over time.

3. Who will calculate my CIBIL score?

Four credit bureaus in India calculate the CIBIL score: TransUnion CIBIL, CRIF Highmark, Equifax, and Experian.

4. How much CIBIL score is required for a loan?

It is advised to have a CIBIL score above 670 to be eligible for a loan. While not all banks agree upon a single number, this is generally considered a good enough score.

5. Does getting a loan lower my CIBIL score?

Getting too many loans can lower your CIBIL score. It is advised to make minimum loan enquiries. These are hard enquiries and reflect poorly. Take only as many loans as will not affect your debt-to-income ratio badly. Otherwise, it can lower your credit score.