CIBIL’s full form in banking means Credit Information Bureau (India) Limited. It is one of the primary factors that is considered before initiating any loan or credit card application. A good CIBIL score will help you to secure loans and credit facilities quickly and of a higher amount whereas a low score can lead to loan rejection.
Let’s understand what exactly a CIBIL score is and why it matters while taking a loan or any other credit facility like credit card, overdraft, consumer loan etc.
Table of contents
What is the CIBIL Score?
The full form of CIBIL is Credit Information Bureau (India) Limited. The company i.e. TransUnion CIBIL Limited is a credit information company operating in India. It maintains credit files on 600 million individuals and 32 million businesses. TransUnion is one of four credit bureaus operating in India and is part of TransUnion, an American multinational group.
CIBIL stands for Credit Information Bureau (India) Limited. The name of this credit information company is TransUnion CIBIL Limited. It keeps track of people’s and businesses’ credit information. They have credit records for more than 600 million people and 32 million businesses. TransUnion CIBIL is one of four credit bureaus in India and is part of the American company TransUnion.
Also Read: Check here some important tricks on how to remove derogatory marks from credit report
Why Does CIBIL Score Matter?
Whenever you visit any bank or financial institution for any type of loan or credit facility, the bank will check your CIBIL score. This is because the CIBIL score and the report show your entire history of existing or past loans and also reflect how you repay the loan. Hence, to understand the repayment behaviour of a customer and to know the debt-to-income ratio, the banks and financial institutions check the CIBIL score. The approval of the loan application completely depends on your CIBIL score.
Let’s understand this with an example. Aman wanted to buy a two-wheeler by taking a consumer loan from a bank. In the past loans, Aman delayed some EMI payments due to which his CIBIL score was reduced to 600. When the bank checked the CIBIL report, it considered Aman as a risky borrower and rejected the loan application.
What is a Good CIBIL Score?
In India, a CIBIL score of 700 and above is usually considered a good CIBIL score. The range of CIBIL scores can be any number from 300 and 900. The CIBIL score fluctuates based on the repayment behaviour of the borrower. Missed EMIs, multiple days past due in CIBIL, delinquencies etc impact negatively on the CIBIL Score. Check more details below:
| CIBIL Score | Remark | Loan Approval Chances |
| 300-499 | Poor | Low or No Chance |
| 500-649 | Below Average | Low (can be approved by NBFCs with high interest rates) |
| 650-749 | Good | Can be Approved subject to terms and conditions |
| 750-900 | Excellent | The loan will be easily approved subject to terms and conditions |
How to Improve CIBIL Score?
If your CIBIL score has dropped, then there are multiple ways in which you can improve your CIBIL score. Paying EMI regularly on time, less use of credit card balance, fewer enquiries etc are some of the best ways to improve the score. If there is a derogatory mark on your credit score, you must understand how to remove it. Check more details below:
Pay Your Bills on Time
Consistently paying your credit card bills and loan EMIs (Equated Monthly Installments) on time is one of the most important factors that will impact your CIBIL score. Late payments or defaults can lower your score. Always try to pay the EMIs timely so that they can be recorded in the report and your CIBIL score improves.
Maintain a Low Credit Utilisation Ratio
Keep your credit utilization ratio (the percentage of your credit limit that you are using) below 30%. High credit utilization indicates a higher dependency on credit, which can negatively impact your score. For example, if you have a credit card with a limit of INR 1 lakh and your outstanding dues are INR 95000 then this will have a negative impact on your score.
Diversify Your Credit Mix
A healthy mix of credit types, such as a combination of secured loans (like home loans or auto loans) and unsecured loans (like personal loans or credit cards), can positively affect your CIBIL score. It demonstrates your ability to handle different types of credit responsibly.
Regularly Monitor Your Credit Report
Regularly check your CIBIL report for any discrepancies or errors. If you find any incorrect information, raise a dispute with CIBIL to get it corrected. Regular monitoring helps you stay informed about your credit status and take timely corrective actions. Any repayment made against any loan or credit card may take up to 10-15 days to reflect in your credit report.
Limit Hard Inquiries
Avoid applying for multiple credit products within a short period. Each application results in a hard inquiry on your credit report, which can lower your score. Multiple hard inquiries show that you have a habit of availing credit frequently which is a higher credit risk. Hence, do not keep applying for credit products frequently.
Also Read: Read this blog and understand the importance of a good credit score
CIBIL score can directly affect your loan approval. Always try to pay all dues on time so that your CIBIL score remains excellent. Check some common FAQs based on CIBIL score below:
FAQs
The full form of CIBIL in banking is Credit Information Bureau (India) Limited. It is a credit information company that plays an important role in assessing the creditworthiness of individuals and businesses before approving loans or credit cards.
The CIBIL score is important because it reflects your credit history and repayment behaviour. Banks and financial institutions use it to evaluate your creditworthiness.
In India, a CIBIL score of 700 and above is generally considered good. Scores range from 300 to 900, with higher scores indicating better creditworthiness. A score of 750-900 is excellent and greatly enhances loan approval chances.
To improve your CIBIL score, follow the below-mentioned steps:
– Pay your credit card bills and loan EMIs on time.
– Maintain a low credit utilisation ratio (below 30%).
– Diversify your credit mix with a combination of secured and unsecured loans.
– Regularly monitor your credit report for discrepancies and rectify any errors.
– Limit the number of hard inquiries by avoiding frequent applications for credit products.
If your CIBIL score is low, banks may consider you a risky borrower, which can lead to loan rejection or approval with unfavourable terms.
To know more about education loans, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
Related Blogs
Follow Us on Social Media
