Did you know that one of the most important numbers when it comes to a person's financial life, banking experience, credit report, and credit history is their CIBIL score? A person's CIBIL score is considered to be so crucial because it has a major impact on how they experience banking and other financial services. Four credit bureaus of India calculate it - TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. Let us understand everything about the CIBIL score more clearly. We will provide you with a comprehensive explanation of what a CIBIL score is, how it is calculated, and how much a CIBIL score is considered a good CIBIL score.

A CIBIL score is a three-digit number that can lie anywhere on the scale of 300 and 900. It is also sometimes called a credit score. As the name itself suggests, an individual's credit score is a reflection of their credit history. It is a part of their credit report. What this means is that your CIBIL score tells how you have handled credit in the past. This includes how you have handled loans, credit cards, EMIs, and all other forms of credit. If you have been good at making your payments on time, your credit enquiries are at a minimum, you pay EMI bills timely, and you have a healthy mix of credit. You will be able to build up an excellent CIBIL score, whereas if you have a lot of existing debt, default payments, too many credit enquiries, etc., your CIBIL score will suffer a lot. You must always attempt to maintain a high credit score by adopting good habits such as timely repayments of loans and EMI bills, having no default payments, keeping a credit utilization ratio as low as possible and trying to have a balanced mix of different types of credit.

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What is the Significance of Your CIBIL Score?

Now that you have a clear picture of what the CIBIL score means, you must also be aware of why this three-digit number matters so that you can make conscious efforts to have a good CIBIL score. Your CIBIL score is said to affect your creditworthiness, but what does that mean? What will happen if you do not have a good CIBIL score? Why must you strive to build a good credit score? Let us take you through the various reasons why you must work at building and maintaining a good credit score. Later we will also help you understand what your specific CIBIL score signifies.

1. Decide eligibility For Loans: In your life, you might sometimes require a loan for various reasons. You might dream of having a house of your own, setting up and expanding your business, purchasing your dream car, or a multitude of other personal reasons. When you approach a bank or some other financial institution to apply for a loan, they will first and foremost check your CIBIL score before they approve your application. A good CIBIL score would assure your eligibility.

2. Lower Interest Rates: Wouldn't it be great that not only are you eligible to get a loan for your financial needs, but you are able to get it at lower than usual interest rates? How is it possible for you to repay the loan and to do it on time. This is possible if you have handled credit wonderfully well in the past and your credit score is excellent. Banks will trust you to repay loans on time. With a higher credit score you have higher negotiation power as well.

3. Higher Loan Amount: Not only do you get lower than usual interest rates, but this negotiation power also extends to the loan amount itself. The higher your CIBIL score is, the more trust the lenders have in you and, consequently, the more they trust you to repay your dues on time. Since the risk is significantly reduced for them, they will be willing to sanction a larger loan amount. This is, of course, extremely desirable because it tremendously increases your spending power.

4. Decide eligibility For Credit Cards: As you might already know, getting a credit card has many benefits. You can avail many wonderful offers, increase your savings while spending money, get amazing cashbacks on your purchases, earn reward points, etc. However, to get your credit card application approved, it is imperative that you have a good CIBIL score. Once again, this comes down to the trust factor. A good credit score tells the banks that you are financially responsible and have paid your dues on time. This means that they can trust you with a credit card.

5. Higher Credit Limit: Just like a good CIBIL score brings you beneficial loan terms such as decreased interest rates and high loan amount it also helps you obtain a higher credit limit on your credit card. This way you can spend money more freely. Other than this a higher credit score makes you eligible for exclusive offers and discounts as well.

These are the multiple reasons why it is important and extremely beneficial for a person to have a good credit score. Now let us move on to understanding what is a good and a bad credit score and why it is so.

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What is a Good CIBIL Score?

As we have already informed you, your CIBIL score can fall anywhere between 300 and 900. We have also informed you about the benefits of having a good credit score and the pitfalls and disadvantages of having a bad and low one. However, people often don't know if their CIBIL score is good or bad. For instance, they have questions like 'is 776 a good CIBIL score?' While each score is seen differently by different banks and financial institutions, there is a commonly accepted division of credit scores into six ranges. Let us find out what they are and what does each one mean for you:

1. Below 300: It is not possible for a person to have a CIBIL score less than 300. This would mean that the concerned individual has no credit history yet. This can happen if you are a student with no employment or if you have just been recentle employed. It takes time to build up a credit history. You can begin by getting a credit card, applying for a loan, etc. You will eventually be able to build up a credit history and a CIBIL score.

2. 300 - 550: This is the lowest range of CIBIL score that an individual can have and affects their financial life very poorly. Most financial institutions see this as a very poor or extremely low credit score and are unwilling to provide you with a loan or a credit card. This is because such a CIBIL score reflects that you have not been responsible with credit in the past, and they cannot trust you with their money. If your CIBIL score is between 300 and 550, then you must improve it to avail financial benefits.

3. 551 - 620: This is not seen as an extremely poor credit score, but it is still considered to be low. If you have been good at handling credit in the past, your CIBIL score should be higher than this. The disadvantages of your credit score being between 551 and 620 are that it will, first of all, make it challenging for you to get loans and credit card applications approved. Even if you do get approval, the loan terms (e.g. Rate of interest, loan amount, loan tenure, etc.) will be highly unfavourable for you.

4. 621 - 700: Anywhere between this range is a fair or an average CIBIL score to have. There is still scope for improvement but you can still be at ease about getting loans and credit cards. With this score, it will not be challenging. However, you must not expect any added advantages such as lower than usual interest rates, longer time to repay the loan or a very high amount of loan itself. That can happen only when your CIBIL score is excellent.

5. 701 - 749: Having a credit score that falls between 701 and 749 means you can relax and rest assured that you will be eligible at all banks and financial institutions to get loans, credit cards and other such facilities. This is a good CIBIL score to maintain and shows your creditworthiness. It builds up trust in the lenders regarding your ability to repay your dues on time.

6. 750 - 900: If your CIBIL score crosses the 750 mark, nothing can be better than that. You will get to experience the best of banking with such a score. Not only will lenders be more than willing to grant you a loan or issue you a credit card, but they will also be willing to negotiate for low interest rates, higher loan amounts, higher credit limits, etc. Apart from all this, you might also be able to enjoy exclusive rewards, offers and discounts.

Read More:: What is Experian Credit Score and How It Affects You

Conclusion

A person's CIBIL score is a very important number that greatly impacts their financial and banking experience. Calculated by TransUnion CIBIL and three other Credit Information Companies (CICs) in India, a person's CIBIL score decides things like their eligibility for loans and credit cards and also influences the kind of advantages and benefits they can get or disadvantages they might have to face while getting credit from banks. Based on people's past financial behaviour, a CIBIL score can range from very poor to excellent. It is generally advised to maintain a score above 700. Anything below that would reduce your creditworthiness.

Frequently Asked Questions (FAQs)

1. How to know if I have a good CIBIL score?

While no specific number is decided to be a good credit score by all financial institutions alike, most of them accept a score above 700 to be a good credit score. So, if your credit score is anywhere between 700 and 900, it is desirable.

2. Is 776 a good CIBIL score?

Yes, 776 is not only good but an excellent CIBIL score. Such a score reflects great handling of credit in the past and increases your creditworthiness in front of banks. Such a score will fetch you great loan conditions and exclusive credit card advantages.

3. Can I get a loan if my CIBIL score is less than 500?

If you have a CIBIL score that is less than 500, it is very difficult to obtain a loan. Banks see this as a very low credit score and do not easily trust you with their money. You must make some efforts to increase your score in order to be eligible for a loan.

4. How can I improve my CIBIL score from good to bad?

You can improve your CIBIL score from good to bad by changing how you handle credit. For instance, start making repayments for loans on time, pay EMI bills on time, do not make too many credit enquiries as this paints you as credit dependent, have a healthy credit mix, etc. Doing all this can gradually increase your CIBIL score.

5. Can I check my CIBIL score online?

Yes, you can check your CIBIL score online on many platforms. Websites like Paisabazaar, Bankbazaar, Paytm, cred etc let everyone check their credit score for free. You can also check your credit score on your banks' official websites/mobile apps or credit card providers. India's four Credit Information Companies also provide one free CIBIL report annually.

6. What is the best CIBIL score? A score between 750 and 900 is considered the best CIBIL score and the highest that any person can have. It is the best CIBIL score because it makes you instantly eligible for getting loans and credit cards and brings added benefits like low interest rates, higher loan amounts and increased credit limits.

7. Can I calculate my credit score myself?

No. You cannot calculate your credit score yourself. In India, the responsibility of calculating people's credit scores rests with four credit bureaus: TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. You can only check your CIBIL score once every year on their websites or mobile apps.