When you apply for any kind of loan the first thing that the lender will check is your CIBIL Transunion score. CIBIL stands for Credit Information Bureau India Limited. CIBIL Transunion score is a three digit number which ranges between 300 and 900. Closer the CIBIL score to 900, better it is. A credit score of over 750 is considered good score. Higher credit score increases your chances of getting loan. In case of unsecured loans such as personal loan you can even bargain for a lower interest rate, if you have a high credit score.
How is Your CIBIL Score Calculated?
CIBIL Score is generally calculated on the basis of a number of important factors by the credit bureau. They are:
- Repayment History: In case of late payments or defaulting your equated monthly installment (EMI), it will negatively impact your score. It is considered as one of the most important factors while calculating your CIBIL Score.
- Credit Utilization: High use of credit regularly indicates that the applicant depends too much on credit and any unwanted incident can push him towards defaulting on the loan. A low credit utilization ratio of below 30% is preferred by lenders.
- Multiple Enquiries – Multiple enquiries present you as desperate and credit hungry. Lenders are reserved towards approving credit applications of such applicants. Thus it is recommended to make a hard enquiry only when you are sure of taking a loan. However, checking your credit score regularly comes under soft enquiries and have no impact on your credit score.
- Number of loans Availed and Applied: The Credit Bureau will keep a track of how many loans you applied in the past and out of which how many loans actually got approved. In case, many loans were rejected, it can negatively impact your score.
- Credit Mix: You should have an ideal mix of secured and unsecured credits to build a strong credit history. But this factor has a low weightage while calculating your score.