Cibil Score is a credit score rating provided by CIBIL which is the oldest credit bureau. A high score indicates the borrower’s timeliness in loan repayment and hence, increases his chance of getting a loan approved by the lender. The score is required while applying for a loan to evaluate the applicant’s creditworthiness.

A credit score acts like the first screen of the potential borrower, and hence a high cibil score increases the borrower’s chance to be considered for a loan application.

Based upon information and data collected from lenders and banks, credit bureaus like CIBIL generate a borrower’s credit report. The score takes into consideration borrower’s credit history, loan repayment, bank activity, types of loans(secured & unsecured), and frequency of application for credit.

The following practices can be followed to maintain a high score-

•         Paying your loan EMI’s on time is critical to maintaining a high score.
•         Do not apply for multiple credit cards/loans in short period of time as it negatively impacts the score.
•         Opt for Secured loan if possible, could be against fixed assets – property, car, jewellery or against financial securities like shares, mutual funds.
•         Use Credit judiciously splurging your credit on regular expenses shows lack of gratitude to the credit sanctioned to you. Therefore, using your credit card for regular expenses should be avoided to apply and get a bigger loan in the future.

Erasing a credit history is not possible. However, a borrower can improve his score by clearing his past dues and building a positive credit history. Several lenders keep themselves from lending money to first-time borrowers, or borrowers with no-credit history. In such a situation, there is no information available about borrower’s credit history and hence, lenders refrain from lending money to them. (Read our guide about Credit Options for Freshers for more details)