CIBIL (Credit Information Bureau India Limited) is the oldest and one of the most popular credit bureaus in India. It was established in 2000 and provides credit scores to individuals and companies based on their credit history. A credit score is a numerical value that ranges from 300 to 900, and it indicates the creditworthiness of an individual or an organization. A higher credit score implies a better creditworthiness, and lenders consider it a positive factor while approving loans and credit card applications.
The credit score provided by CIBIL is calculated based on various factors, including an individual’s credit history, repayment behavior, credit utilization, loan tenure, and the type of credit they have availed. The following are the factors that contribute to the calculation of the credit score:
# Payment History: This factor contributes to the highest weightage (35%) in the credit score calculation. It takes into account an individual’s credit history and their repayment behavior. A record of timely payments on loans, credit card bills, and other debts can have a positive impact on the credit score.
# Credit Utilization: This factor contributes to 30% of the credit score calculation. It refers to the percentage of the credit limit that an individual has utilized. Lenders consider individuals with a lower credit utilization ratio to be more creditworthy.
# Credit Mix: This factor contributes to 25% of the credit score calculation. It takes into account the various types of credit an individual has availed, such as home loans, personal loans, credit cards, and others. Having a good mix of secured and unsecured loans can have a positive impact on the credit score.
# Length of Credit History: This factor contributes to 10% of the credit score calculation. It refers to the length of time an individual has been using credit. A longer credit history can have a positive impact on the credit score.
# Credit Inquiries: This factor contributes to 10% of the credit score calculation. It refers to the number of times an individual has applied for credit. Multiple credit inquiries within a short span of time can have a negative impact on the credit score.
CIBIL provides credit scores ranging from 300 to 900, with a score of 750 and above considered to be good. A higher credit score implies a better creditworthiness and can help individuals to avail loans and credit cards at a lower interest rate. Lenders consider individuals with a higher credit score to be less risky, and hence, they offer loans and credit cards at a lower interest rate.
In conclusion, the credit score provided by CIBIL is an important factor that lenders consider while approving loans and credit card applications. Individuals can improve their credit score by maintaining a good payment history, keeping their credit utilization low, having a good mix of secured and unsecured loans, and avoiding multiple credit inquiries within a short span of time.
