While the western countries had developed a credit monitoring system way back in 1950s, it was only in 2000 that CIBIL was incepted as the first-ever credit rating agency in the country. CIBIL has come a long way in making India a financially literate nation. A credit rating model made the financial market more transparent, consistent and regulated which spread awareness among financial institutions about managing risk and reducing bad loans. CIBIL has been improving its database and technology since. Now individuals can easily check their free credit score online. Other smaller companies like Equifax, Experian and High Mark are also offering similar services in the market but CIBIL is the largest organization formed under RBI and governed by the Credit Information Companies (Regulation) Act of 2005.
Your CIBIL score is the first thing that banks and financial institutions check before granting you any kind of loan. It is a three digit number usually ranging between 300 and 900; a score below 300 is bad whereas 900 is the best. Every month, banks and NBFCs furnish their reports to CIBIL on the basis of which it calculates the CIBIL Score for different individuals and businesses. This, in turn, helps them choose the right customers and monitor the repayment patterns of existing customers.
How to check CIBIL score online for free?
According to a research, more than 79% of the loans are approved for people who have a CIBIL score of more than 750. So if you have been wondering how to know CIBIL score, you can follow the steps given below:
Step 1: To know your CIBIL score for free, visit their website- https://www.cibil.com/freecreditscore/
Step 2: Fill the first form that requires all your basic information like name, address, contact number and PAN details. Make sure you enter correct PAN details otherwise you might not be able to go to the next step.
Step 3: Answer 3-5 questions about your Loans & Credit cards on the basis of which CIBIL will calculate your free credit score and prepare the credit report.
Step 4: After you fill in all the details, the website will show you your CIBIL score and CIBIL report.
However, checking your credit score once is not enough. You must monitor the ups and downs in your report as credit agencies, banks and financial institutions review and renew the report every month. For this you will need regular updates but CIBIL allows a free check only once. For regular reports, you need to take a paid subscription to CIBIL.
You can get regular credit scores and credit reports on Paisabazaar.com for free. We offer CIBIL report equivalents that are also based on your financial transactions made during a particular period. Knowing your credit score will help you strategize your finances smartly so that you don’t encounter any problem at the time of taking any loan in the future.
People think that doing CIBIL status enquiry too many times might also have a negative impact on it. This is not always true. If any individual checks your credit score, it is called a soft enquiry and does not have any bad repercussions. But when a bank or financial institution takes a peek at your CIBIL report, it is considered as hard enquiry and it might impact your credit history.
How to Understand Your CIBIL Score?
As discussed above, a CIBIL score usually ranges between 300 and 900. For some people, it might go below 300 but never above 900. Here’s what you can make of your CIBIL score:
Below 300: If your CIBIL score is below 300, you will not get any loans whatsoever. You are considered a huge risk for the banks and financial institutions and they do not find you credible enough to lend an amount.
Between 300 and 450: Though not as bad as the previous one, this score is not worth much credibility. You should take it as a warning sign and start paying your EMIs on time to improve it before you apply for a loan.
Between 450 and 600: This is an average score and is neither too good nor too bad. With a score like this, your loan could get approved in some banks while others might be apprehensive about lending to you. You can also get credit cards with lesser credit limits.
Between 600 and 750: This score is very good. Almost all banks will be ready to give you loans and credit cards, although you might not be able to negotiate a competitive rate.
Between 750-900: If you have a credit score in this range, you have maintained a perfect financial track record. Banks will not only give you loans for a larger amount but will also be ready to negotiate a good deal. Credit cards with higher credit limit will be offered to you along with a great deal of cashback and rewards.
Useful Post: How to read your CIBIL Report?
Factors that affect your CIBIL Score
Given below are a few factors that have direct impact on your CIBIL score:
Loan Repayment Trends: Your loan repayment history directly impacts the CIBIL score. If you have defaulted on a number of credit card payments, loan EMIs, etc., it will have a negative effect on your credit score and it will drop. On the other hand, if you have followed the right payment schedule in the past and made all EMI payments on time, your CIBIL score will be good.
Number of Loan Applications and Rejections: It is all right to have some loans and credit cards at hand when you are making timely payments. However, if you apply for a number of loans at many institutions simultaneously, it can have a negative impact on your CIBIL score. This is because every time you apply for a loan it gets registered in the system and when it is rejected it gives a minus mark.
Use of Available Credit: How you use your available credit also affects your credit score. Basically, you should not make too high utilization of your credit. You can arrive at your credit utilization limit by dividing the total outstanding amount by your total credit limit. As the time passes, your repayment burden should come down.
More Unsecured Loans in the Portfolio: As the name suggests, unsecured loans are given out by the banks and NBFCs without taking any asset as collateral. Such loans are risky for the lenders. So, if you have high percentage of unsecured loans in your portfolio, this could negatively affect your CIBIL score. Personal loan is an example of unsecured loan.
Acting as Guarantor/Co-borrower for a Loan: CIBIL does not only monitor your loans but also keeps into account the loans for which you stand as a guarantor or co-borrower. If the primary borrower defaults in making a payment on time, it will have negative impact on his CIBIL score as well as on yours.
Loan Tenure: Longer loans are usually more rewarding if you keep making timely payments of the EMIs. Home loan is one such example.
Increase in Credit Limit: If you request frequent upgradation of credit limits, you are seen as a credit hungry person and it adversely impacts your credit score.