- What is meant by cibil credit score? How is it calculated?
A cibil credit score ranges from 300 to 900 and is the three digit numeric representation of a borrower’s credit history. The score is calculated using advanced analytics, and there are some common elements which figure in the algorithms of all major credit information companies. These are-
– Past performance
– Attributes of credit
- Why is cibil score range important?
Cibil credit score is important because it impacts every sphere of a borrower’s financial life, including the interest rates she ends up paying on the loans she take. The credit score influences the potential lenders’ decisions—lenders use this score to gauge the likelihood that the loan will be paid back on time. Therefore, raising creditworthiness may not only save the borrower a ton of money, but also open new possibilities for her.
- What impacts my cibil credit score range?
The following are the parameters that have a major affect on a borrower’s credit score—
– Past payment track records
– Past defaults and write-offs
– Reliance on secured or unsecured loans
– Use of credit cards
– Loans as proportion of income
– Loan enquiries
- What are some ways to improve my cibil score range?
Here are some ways to improve your score and help it stay there—
– Pay on time: be sure to make timely repayments, and pay off your account as early as you can.
– Pay off debt rather than moving it around. Don’t borrow from Peter to pay Paul!
– Avoid bankruptcies and foreclosures, as these will have a negative impact on your score.
– Maintain a healthy credit mix. A good mix of secured and unsecured loans will help the borrower raise his or her score. If a borrower’s portfolio is skewed towards unsecured loans, lenders may view it negatively.
– Do not use your entire credit, as this will raise the credit utilisation rate, which in turn will have a negative impact on the credit score.
- What is a good cibil score range?
The closer is the score to 900, the more will the banks be willing to lend to the borrower. It has been observed that almost 80% of borrowers who receive loans have credit scores of 750 and above.
- Will the non-payment of loans for which I am the guarantor affect my cibil score range?
Yes. Banks and NBFCs ask for guarantors for loans to ensure that the loan they provide is paid off even if the principal borrower is unable to repay the loan. That means that a guarantor is equally responsible for the loan as the principal borrower is. Thus any default on the payment of the loan by the principal applicant will affect the guarantor’s cibil credit score as well.