November 5, 2024 · 11 mins read
Santosh Kumar
One of India's major credit bureaus includes CIBIL (Credit Information Bureau(India) Limited). A CIBIL score is a 3-digit numeric that displays the creditworthiness of a person. It summarizes a person's credit history, credit rating and credit report. CIBIL score ensures easy approval of credit. A high CIBIL score, usually above 750, is considered a good score to get approval for credit and avail of loan benefits. CIBIL score is considered as a primary factor by lenders during loan applications to evaluate default of risk. The CIBIL score includes specific components and is affected by many factors, the details of which are further explained below.
1. 750 - 900: CIBIL scores in this range imply an excellent credit history, allowing borrowers to easily obtain personal, home, and other unsecured loans. It also depicts a stable record of on-time payments. Borrowers have the advantage of getting loans at the best interest rates and high loan amounts, along with exclusive financial products.
2. 700 - 749: Scores in this range signify that there is a strong history of on-time payments, which is a positive sign for lenders. Borrowers can benefit from greater access to credit with favourable interest rates and flexible repayment terms.
3. 550 - 700: When there have been irregular or delayed payments, the score falls in this range, which seems to be risky for lenders to provide credit. Borrowers with scores in this category are offered high interest rates or get their loan applications rejected.
4. 300 - 550: CIBIL score in this range is considered the lowest score and indicates that there are credit issues, such as defaults, which will make it difficult for borrowers to get a loan. Lenders are reluctant to approve loans for borrowers with such high credit utilization and a history of late or neglected payments.
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A CIBIL score of 768 is considered excellent because it indicates that the borrower has high creditworthiness. Borrowers can get loans approved quickly and avail of benefits like high loan amounts and low interest rates. A score of 768 indicates that the borrower is good at credit management and has a stable record of on-time payments. More details on the importance of the CIBIL score are explained further to learn about its benefits.
1. Greater chance of loan approval: a high credit score indicates good credit management and behaviour, so there is no risk of default for lenders, increasing the chances of getting loans approved easily.
2. Low interest rates: lenders provide loans at lower interest rates because of a good CIBIL score.
3. Access to pre-approved loans: A good CIBIL score increases the chances of getting pre-approved loans and credit card offers with minimal documentation and process.
4. Access to premium credit cards: credit card approval is based on the creditworthiness of the borrower as well, which is determined by the credit score. Borrowers with excellent CIBIL scores are provided access to premium credit cards after fulfilling the requirements.
5. Approval for high loan amount: A high CIBIL score can get approval for loans with higher amounts, as high credit scores indicate good credit management and a lower risk of default.
6. Approval of longer tenure loans: Long tenure loans involve a high degree of risk to the lender. However, a high CIBIL score will help borrowers get approved for longer repayment tenure, resulting in smaller EMIs and a lower monthly credit burden.
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1. Easy credit: a high CIBIL score indicates that getting loans and credit from lenders is easier. Lenders have a lower risk of default if the borrower has a good credit history.
2. Loan Approvals: a good CIBIL score allows borrowers to get their loans approved quickly. Those with lower scores will find it difficult to get their loan applications approved and may even get loans for a higher rate of interest.
3. Low Interest rates: borrowers with high CIBIL scores always get the advantage of getting their loans at lower interest rates compared to those with lower CIBIL scores.
4. Increased Loan Limits: excellent CIBIL scores increase the chances of getting a loan approved of higher amount along with lower rates of interest.
5. Easy approvals for Rentals/Leases: having a good credit score can simplify the process of getting approved for rentals or leases.
6. Credit card offers: people with high CIBIL scores get the advantage of exclusive offers on credit cards from banks with additional perks and rewards.
1. Repayment History: payment history includes every delayed or missed payment. On-time payments will not have a negative impact on the CIBIL score.
2. Length of credit history: also known as credit age, is an important factor affecting credit score. Responsible credit management, clean repayment records and a history of financial stability will have a favourable impact on the CIBIL score.
3. Types of Credit: different types of credit, such as personal loans, credit cards etc., can influence the credit score. A diverse credit portfolio will be beneficial.
4. Multiple credit applications: multiple credit applications in a short period of time will negatively impact the credit score as it means that the borrower is in need of money and will likely have trouble during repayment.
5. Credit utilization: credit utilization is the percentage of available credit; if it is within reasonable limits, then it will not impact the CIBIL score.
6. Errors in CIBIL report: incorrect record of default payments or errors in personal information etc. will have a negative effect on the CIBIL score. Borrowers must regularly check credit reports and rectify errors.
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1. On-time payments: paying monthly bills on time will be an advantage, as delaying payments can have a negative impact on the credit score.
2. Diverse credit portfolio: having different types of credit, like loans, mortgages, etc., can increase the score.
3. Clear debts: settle any outstanding debts because missed payments can impact credit history and can stay in the report for a long time.
4. Maintain credit utilization ratio: The credit utilization ratio should always be below 50% of the credit limit as the ratio makes up 30% of the CIBIL score.
5. Limit credit applications: applying for multiple credit cards or loans in a short period indicates a need for urgent money, implying an increased risk of default.
6. Keep old accounts open: keeping old accounts open will show a good repayment history and help establish a longer credit history.
7. Full payment: paying full bills instead of the minimum amount will positively impact the CIBIL score.
8. Manage Hard inquiries: hard inquiries will lower the credit score, which is why it is important to minimize the number of hard inquiries done by lenders.
9. Seek professional help: professionals can offer different strategies that can help improve the CIBIL score.
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The payment history is one of the biggest factors that make up the CIBIL score. They have both a positive and negative effect on the CIBIL score. If payments are made on time and the borrower has no lagging payments, it boosts the score. However, if the borrowers miss payments or have delayed payments, it adversely affects the score. Borrowers must be responsible and manage their credit well to avoid any reduction in the score.
The amount of credit the borrower uses in proportion to the credit available is known as the Credit Utilization Ratio, also known as credit exposure. The credit utilization ratio is also one of the most important factors that affect the CIBIL score. Using up to 30% of the total credit limit is ideal to avoid struggling with finances by exceeding the limit, which can lead to the risk of default or application rejection.
Credit history includes all a person's payment activities and borrowings since the year they applied for credit or opened a credit account. A long credit history can be of benefit to the borrower as it suggests that the borrower is good at credit management. A good credit history can be helpful when applying for loans. Different types of credit, like secured and unsecured loans, are also considered beneficial as they suggest the borrower has experience handling both.
Hard inquiries are included in other factors that are a part of the CIBIL score. When applying for credit, the lenders verify the creditworthiness of the borrower by checking CIBIL reports from the credit bureau. Such inquiries are called hard inquiries, which can impact the CIBIL score negatively. To avoid hard inquiries, borrowers should avoid applying for multiple credit in a short period of time.
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A CIBIL report consists of detailed information about the credit history, personal information, loan accounts, credit card information and other enquiry information of the past 36 months. The CIBIL score is derived from the CIBIL report to provide a numerical value of the creditworthiness of a person. It is important to understand the importance of the CIBIL report and CIBIL score, as it is a significant aspect of the loan eligibility assessment. To learn about its benefits and other information, more details about the CIBIL report are explained further below. Maintaining a good CIBIL score ensures safety during unexpected financial requirements because a good score can reassure there is available and accessible credit.
1. CIBIL Score: the CIBIL score is based on the information derived from the credit behaviour. A CIBIL score must be above 700.
**2. Personal Information: **This section includes all personal information about the borrower like name, date of birth, gender, identification number etc.
3. Contact Information: contact information like phone numbers and addresses is provided under this section.
4. Employment information: income details of the person, whether monthly or annual, as reported by financial institutions, is mentioned in this section
5. Account Information: all credit related information like name of lenders, credit type, ownership details, loan amount and all payment details are mentioned here.
6. Enquiry Information: whenever the enquiries are done during the application of credit, the system takes note of it in the credit history.
Read More:: Is 776 a Good CIBIL Score?
It is important to understand the significance of a good CIBIL score to assess creditworthiness and manage credit well. Many borrowers often ask the question, "is 768 a good CIBIL score?" A CIBIL score of 700 and above is considered a Good and Excellent CIBIL score. Lenders find it easier to approve loans to borrowers with high CIBIL scores, along with other benefits like low interest rates, high loan amounts, pre-approved loans etc. Many key factors, like making on-time payments, maintaining a low credit utilization ratio, avoiding applications for multiple loans, etc., must be ensured to avoid low CIBIL scores. Borrowers must maintain a good CIBIL score, which indicates that the borrowers have responsible credit management. A high CIBIL score ensures that there are no rejected loan applications that may lower the CIBIL score.
Is 768 a good CIBIL score?
Yes. Having a CIBIL score of 768 is considered an excellent score, and borrowers have the advantage of getting loans of higher amounts with low interest rates.
How to maintain a good CIBIL score?
Some tips to maintain good CIBIL score are:
1. Make timely and consistent payments
2. Check for errors in CIBIL reports and rectify them
3. Maintain a low credit utilization ratio
4. Avoid applying for multiple loans in a short period
What is a good or excellent CIBIL score?
CIBIL scores above 700 are considered to be good scores for loan applications.
What is the benefit of having a good CIBIL score?
A good CIBIL score allows borrowers to get easier approval for loans with favourable interest rates, high loan amounts, and other credit benefits.
What affects the CIBIL score?
There are a number of factors that have an effect on the CIBIL score:
1. Repayment history 2. Credit utilization 3. Types of credit 4. Length of credit history
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