With CIBIL being the oldest Credit Bureau in India, people usually refer to credit score as CIBIL score. CIBIL score numerically represents your credit history and repayment patterns. CIBIL is a three-digit number that is based primarily on the applicant’s financial history and it ranges between 300 to 900. The score is considered as good as closer to 900 and vice versa.

According to CIBIL’s own research, the majority of loans approved are for the applications that have a credit score of 750 or above. CIBIL score is basically a representation of your financial position.

In India, Banks usually consider CIBIL score before approving any loan request. Therefore, maintaining a credit history and obtaining a credit score is important because it enables you to apply for loans on favourable conditions. Otherwise, lenders find it hard to evaluate your creditworthiness if you have no credit history or score.

What Is the Difference Between a CIBIL and a Credit Score?

CIBIL Score is a credit score generated by TransUnion. The TransUnion CIBIL Credit Score is the benchmark of credit scores and the only one that is taken into consideration by banks in India when applying for a loan. While there are a number of other credit bureaus that offer credit ratings, CIBIL is the one that banks trust the most.

When was CIBIL Bureau formed?

TransUnion CIBIL Limited (earlier known as Credit Information Bureau (India) Limited) is India’s first credit information company, initially established in 2000. It obtains and stores personal and business credit information, including loans and credit cards. It gathers and stores personal and business credit information, such as loans and credit cards. The credit bureau receives these records on a regular basis from member institutions. The bureau then analyzes the information to generate credit reports and calculate credit scores. It’s important to remember that CIBIL is just a credit information database and n o loan decisions are made by the credit bureau. It only provides data to banks and other financial organisations, who use it to check loan and credit card applications.

CIBIL Score and it’s Classification

CIBIL Score is a credit score that gets generated by TransUnion and is accepted throughout the country. It is a numeric value that ranges between 300-900. Where the score is just as good as close it is to 900. The credit scores of an individual are assigned by the credit bureaus and are therefore classified into several categories. The categories of CIBIL score in India are as follows:

Credit Score of 800 or above:- This score is generally considered as an exceptional credit score and it suggests that the lender is willing to offer you the best possible interest rate on a loan. This category of applicants are most likely to get the least interest charged by the banks on their loans.

Credit Score between 740 – 799:- This is regarded as a very good credit score and banks are willing to provide you with a low interest charged loan as you are considered as a low-risk applicant.

Credit Score between 670-739:- Although the credit score falling under this category is considered a good credit score, the banks consider you as a moderate risk applicant and are thus offered a loan with comparatively higher interest rates.

Credit Score between 580-669:- Banks consider these scores as a high risk applicant and are most likely to charge a very high interest rate and there are chances that a bank may even reject their application.

Credit Score below 580:- Anything below 580 is considered as a poor credit score and the chances of getting the loan application approved by any bank are very less for this category of applicants.

Credit Score between 1-5:- A CIBIL score of 1 to 5 is displayed when the borrower has a credit score of less than 6 months. This indicates the level of risk a lender may experience when lending to a new borrower where 5 denotes a smaller risk and 1 denotes a higher level of risk.

Credit Score is Zero or Negative:- A Zero credit score indicates NH or No History where a negative score indicates NA or Not Available.

How is your CIBIL Score Determined?

Credit bureaus generally consider 6 primary elements to determine your CIBIL score. Your credit inquiries, credit usage, existing loans, your repayment history, type of loan and length, and your repayment history. When determining a credit score, the most weight is always given to repayment history, existing loans, and credit usage.

CIBIL Score not Getting Generated?

It can be due to many possible reasons. TransUnion identifies you and your records based on the details that exist in your banking records. Often this information is provided by you to banks a long time ago. Details like phone numbers, addresses, employment details tend to change over time but are often not updated in your banking records. And if there’s a mismatch with the banking records, CIBIL does not show you the score because it has not been able to identify you with sufficient certainty. In such cases, it is best to review all details in your banking records and write to CIBIL. If there is a discrepancy, only they can rectify it.

Cost to check your CIBIL Score

In India, you can either check your CIBIL score by paying a fee on the official CIBIL website, or you can check your CIBIL score for free on the official CIBIL partner websites. TransUnion CIBIL charges Rs. 550 for a basic credit report and Rs 800 for a standard credit report for two credit reports a year. Another fee will be imposed if you want to check your score more than 2 times in the same year.

There are also various subscription packs available on the official CIBIL website.

The Basic Pack:- The Basic Pack is for a month and would cost you Rs.550. This pack provides you with unlimited access to your CIBIL dashboard and Score Simulator. CIBIL will customize personalised loan offers for you with this pack.

The Standard Pack:- The Standard Pack comes with a validity of 6 months and has a price tag of Rs.800. Apart from all the benefits that are offered with The Basic Pack this pack offers you 24X7 credit monitoring with CIBIL alerts.

The Premium Pack:- The Premium Pack has a validity of 12 months and costs Rs.1200. The benefits with this pack are the same as the standard pack. The only difference is that it has a validity of 12 months.

What to do if your CIBIL Score is Zero?

Having Zero CIBIL score is not a bad thing, you can still apply for and obtain loans or credit cards from many banks or NBFC, however it simply limits your opportunities to obtain the best offers, as compared to a good CIBIL score. This happens if you haven’t taken out a loan or a credit card, or if credit bureaus don’t have enough information about your credit practises. In such a case, your credit score displays a disclaimer about the lack of credit history available to them. It takes time to build a credit history, about six months to a year, depending on how effectively and frequently you use and manage your credit.

How bad is it to have a Low CIBIL Score?

There are a number of disadvantages that come with a low CIBIL Score, like the fact that your loan application may be rejected directly, or that you will have to wait longer than normal, there will be more paperwork required, and that you will pay a higher rate of interest. A Low CIBIL Score affects you in a variety of ways, whether you are aware of it or not. Many times CIBIL score is low either because of your repayment habits or it can be because of an error in the credit report which you are not aware of. Therefore, it is recommended that you keep a regular eye on your credit report to make sure there are no errors.

Significance of CIBIL Score

Your credit score is a representation of your financial position. When you look at your score and report, you’ll see where you are and what issues you need to focus on. Your CIBIL, is a summary of your present and previous credit activities. Monitoring your report can also assist you in reporting and correcting any inconsistencies that have resulted in a lower score.

A CIBIL score of 750 or above is deemed acceptable by most financial institutions and lending platforms. As a result, maintaining a credit history and obtaining a credit score is important because it enables you to apply for loans on favourable conditions. Lenders find it hard to evaluate your creditworthiness if you have no credit history or score.

Can CIBIL Score Impact Your Credit Card Eligibility?

While issuing a credit card, banks always run a background check on the applicant by checking various things about the applicant such as CIBIL score of the applicant. If the applicant has a CIBIL score of 750 or more the banks consider such an applicant as low-risk and the chances of getting a better deal on the credit card is much higher rather than an applicant who has a poor CIBIL score. You are not considered eligible for a credit card, in many banks, if your credit score is below 750.

How can you Improve Your CIBIL Score?

Maintaining a good Credit score requires disciplined credit management. Though your Credit score won’t increase overnight, there are surely some measures that you can adapt to improve your credit score rating. It takes anywhere from 6 months to a year to improve your CIBIL score.

Some of the measures to improve your credit score are listed below:

Timely EMIs:- Make sure to pay your loan EMIs as well as your credit card bills on time to maintain a good credit score. Regular EMIs portray your appropriate behaviour to the bank and help you improve your CIBIL score.

Choose your Loan Types wisely:-Maintaining a healthy balance of secured and unsecured loans can help you improve your reputation. Taking out only unsecured loans may make you look like a high-risk individual.

Keep a Low Debt-Income Ratio:- Although your loan repayments will lower the amount of your loan over time, it is also advised no to exercise your credit card limit too frequently as it may reflect negatively on your credibility.

Do not apply for various Credit Cards:- Credit cards can be tempting at times as they are an easy source for quick cash requirements but maintaining too many credit cards can be a task at times and missing out on even a single EMI can have an adverse impact on your credit score.

Maintaining Old Debts:- If you have an old debt on your credit report and you have been consistent in paying it’s EMIs regularly, it reflects a positive image of your creditworthiness and can help you build your credit score.

Benefits of having a High CIBIL Score

A high CIBIL score will make you eligible for a variety of benefits that are offered in the market and that will help you save money and simplify your financial life. Here are some of the various benefits of having a good credit score.

Low interest rates and Reduced Credit card Charges:-If you have a good credit score, you will almost always be able to receive the lowest interest rates and pay reduced finance charges on credit card balances and loans. If you pay less interest, you will be able to pay off your debt faster.

Easy Credit Card and Loan approvals:-Your chances of getting credit increase when you have a high credit score. In all, you can apply for a loan or a credit card without having to worry about its approval.

Provides you more Bargaining Power:-If you have an excellent credit score, you can further negotiate the offered interest rates on credit cards and loans.

Easy Top-up:-On an already existing loan, you can apply for a top-up and increase the loan amount easily as the banks will consider your credit score for the same and would consider it to easily add some amount in the already existing loan amount.

When should you check your CIBIL Score?

If your credit score is low and you have filed an application before or without having a look at your credit score, you should recheck it. The loan, credit card, or other application may be rejected by the lender. A regular credit score check may, however, be necessary at other times as well.

The following are some cases when you should check your CIBIL score:

While applying for a Loan or a Credit Card:- While applying for a Loan or a Credit Card you should always consider your credit score before applying as the lender would check your credit score as soon as he receives your application.

While carrying out the Balance Transfer:-Before transferring the existing loan to a different lender with a lower interest rate, you should check your credit score. You may be able to negotiate a cheaper interest rate if you have an excellent credit score. Check your credit score again after you’ve completed the transfer to see if there is a  change. If the lender declines the application, an inquiry is placed on your credit report. Each such inquiry has the ability to lower your credit score.

When the Debt is Completely Paid off:-Paying off a loan might be a great relief but do you know how it will influence your credit score? It all depends on your credit history and the credit provider you use. If the portfolio is predominantly unsecured, a credit mix that includes more secured loans may assist improve credit ratings.

While a Debt Settlement:-When a lender and a borrower reach an agreement on a debt settlement, they agree on a lower payment than the initial loan amount. This relieves you of your loan obligation, but it stamps your credit record as settled. If you have additional money, you can get the tag removed if you pay out the whole sum in the future. You can go to the lender’s branch and request that the outstanding loan amount be paid. Following that, you will be able to see your credit report and calculate your credit score.

How to Raise a Dispute to Rectify Errors in a Credit Report?

Any mistakes in your CIBIL report must be identified and corrected, since they can affect your creditworthiness and keep your score low without your knowledge. If you have mistakes on your credit record, notify your lender immediately and file a dispute with the credit bureau.

You can file a dispute by filling out an official form on the CIBIL website. The form is then verified with the relevant bank or lender, and if the claimed mistakes are verified, CIBIL is informed and an updated version of your credit score is provided to you via email. This entire process may take upto 30 days.

Types of Errors in CIBIL Report

Account or Personal Information Mismatch:-Typing errors in an address, a birth date, or a spelling mistake in a name are common errors and can be rectified.

Incorrect Account Tagging:-Another account that you do not own can be displayed in your credit report, due to any clerical mistakes or illegal identity usage.

Days Past Due (DPD):- If DPD displays anything other than ‘000’ or ‘XXX,’ your payment is past due. If you have paid the installment but DPD still displays an amount larger than ‘000,’ the lender or credit bureau must have made a mistake.

To rectify any of the errors all you need to do is fill out a form for online dispute settlement and the credit agency will remove the error after verifying it with the original details so make sure you enter the correct details while checking your credit score.

Closed Account is being displayed as Open:-This error can occur even if you have paid off your credit card, and it still appears on your credit report. Most likely, the lender did not notify TransUnion CIBIL.

To rectify this error, you can locate the account that has been closed on your credit report and check with the lender to see whether the account has been closed and reported to the credit bureau. Provide them with the relevant information and request a No Objection Certificate (NOC) if the account has not yet been terminated. When the bureau receives updated data, it will be removed from the report.

Misconceptions that affect CIBIL Score

Not requesting Credit:- If you don’t have a credit history, banks will have to do a more thorough investigation to check your creditworthiness and repayment capacity. As a result, they’ll take extra precautions when evaluating your loan application. Avoiding credit is beneficial, particularly if you don’t utilise it for any of your financial requirements.

Credit Scores change Instantly:- If you have no credit history, you may be tempted to apply for credit cards and small loans in order to establish one. This is a bad idea since it will be obvious to credit institutions that you are seeking to create a credit history quickly. Your credit score would suffer as a result.

Overusing Credit is a Good Idea:- The credit use ratio rises when a credit card’s credit limit is exceeded (the ratio of credit card balance to credit limit). It’s preferable if the ratio is as low as possible. Your credit score may suffer if you choose to increase your repayment responsibilities.

Guarantor’s score will always Increase:- You may have agreed to serve as a guarantor on a loan application for a friend or family member, but this might harm your credit in two ways: if the friend defaults on his loan, or if you are financially committed to satisfy the guarantee’s obligations. Closing Old Accounts:- Some of you may be eager to close an old account since credit cards are considered unsecured loans. As a result, your credit score may suffer. You might be able to increase your borrowing choices by using an old credit card account with an excellent payment history.