TransUnion CIBIL Limited, formerly known as Credit Information Bureau (India) Limited is India's first Credit Information Company (CIC) which was founded in August 2000. As the name suggests, the CIBIL is related to an individual's information with regards to payments concerning loans and credit cards of an individual.
With the help of a CIBIL score, which is a numeric summary of an individual's credit history that helps them evaluate and approve loan applications. It is this CIBIL score that helps the banks and financial organizations calculate any potential risks that might be involved in lending the individual money and alleviate any losses. The importance of CIBIL score is immense for the Indian financial system as it leads to a faster approval for loans as per the credit score.
CIBIL focuses on two areas, one, the Consumer Bureau that is responsible for taking care of the credit records posed by a customer; two, the Commercial Bureau which takes care of the records of various organizations and institutions. One must understand that the CIBIL is just a heap containing information of your credit and is not responsible for making any decisions as to whether or not one will get credit but helps the financial institutions to make that decision with all the information it provides.
Calculation of CIBIL score
Now that you know the importance of a CIBIL score in the procedure of loan approvals, it is also necessary to know how is the score calculated and what are the steps involved.
The factors affecting the CIBIL scores are many, and includes factors such as the payment industry, the duration of credit history, the kind and number of loan accounts, any outstanding debts to be cleared and many similar such things. Upon calculating the CIBIL score, the same is then passed on to the banks and other similar institutions for assessment. Depending upon the limit/criteria for credit score, the loans are approved or held back. It must be noted, however, the credit score varies according to the bank and the standards set for approval.
How can one check their CIBIL score?
CIBIL, Equifax, CRIF High Mark and Experian are the 4 bureaus that issue credit score and according to the guidelines laid by RBI, all the CIBIL bureaus are mandatorily supposed to provide a free credit score once in a year to an individual. Anyone who wishes to know their credit score can go visit them and request for their report either online or through post.
It is very easy to get your credit report online and is in fact rather simpler and quicker. Once you get a confirmation, you shall receive it on your email.
Either ways, you will have to submit a set of documents in order to authenticate the report that you will receive on mail. In case online isn’t an option for you, one can also request it by post y sending a printed application form. Once verified, you will receive the report via post on the address in the documents.
How does the CIBIL score matter:
As stated above, it is the CIBIL score that in turn decides the approval or rejection of a loan depending upon the kind of credit history one has. The calculation of CIBIL score has a certain procedure to be calculated and it is that which reflects upon your financial status which ultimately helps in the assessment of one's loan.
Here’s the list of things that affect your CIBIL score:
1. Credit approvals – easy and quick
This is what is almost completely based on your CIBIL score, and if or not it gets approved, the CIBIL score gets to decided. The person at the giving end of this must be well aware of where the receiver stands in terms of financial reliability as well as eligibility. A CIBIL score that does not meet the standards of approval will affect the acceptance or rejection of your credit. It is only a good CIBIL score that will allow you to get loads (home, personal care or others).
Even if you do not have a good CIBIL score, you might get credit but at higher costs of returns or from distrusted sources.
2. Interest rates – relatively low and negotiable
A CIBIL score that meets the required number will help you get the lowest possible interest rates for even huge sums of money.
3. Housing approvals – faster and more reliable
Yet another important factor, approval for housing – buying house or renting on depends a lot on your CIBIL score.
4. Other factors
Other factors that includes places where your CIBIL score will matter is places like getting a relatively smart plans for your new cell phones and also get a lesser insurance premium.
Advantages of a good CIBIL score:
- It allows you to get quick credit
- Mortgages can be approved and passed faster Y
- ou get to negotiate on rates and also get the lowest possible interest rates
- You can ask for higher sums of money with a good credit score
- Housing loans are approved faster
- There is no security deposit you have to pay for cell phone
- Also provides you with some exciting credit card offers which otherwise you wouldn’t be eligible for
Having stated all the factors that affect your CIBIL score and also mentioned the advantages of a good CIBIL score, one must know that it affects your abilities to get loans and credits big time and in turn affect or help you in your financial journey. It is this CIBIL score that requires you to pay your credit bills on time, clear off your loans timely and make smart use of credit cards.
CIBIL score is what the first take of the lender is, and a good CIBIL score is what gradually makes things smooth and also easy to attain. Someone with a nice CIBIL score will not only be given more preference but also have more authority in terms of negotiation before the lender. CIBIL score must be taken care of and maintained well enough so that it entrusts the lenders trust upon you and helps you fasten the entire process of credit.