The credit score is a three-digit numerical value that represents a borrower’s creditworthiness and repayment capacity as well as the attitude they have towards credit. In India, four credit information bureaus are authorized by the Reserve Bank of India to assign credit ratings to borrowers. These are Equifax, Experian, CRIF Highmark and TransUnion CIBIL. Of these four, lenders trust and use TransUnion CIBIL the most and CIBIL calls the credit score it assigns to borrowers a CIBIL Score.
TransUnion calculates an individual’s CIBIL score based on the information related to their credit history registered in their Credit Information Report (CIR) or CIBIL Report. The report contains detailed information on all the loans you have as well as any other form of credit you may be using. The CIBIL score ranges between 300 and 900 and borrowers can check CIBIL score by going to the Accounts or Enquiries section of the CIBIL report.
CIBIL Score Ranges and Their Impact
As mentioned before, the CIBIL score ranges between 300 and 900, with 300 being the lowest and 900 being the highest. Borrowers who desire to avail themselves of lucrative loan deals must maintain a good CIBIL score. Let us understand different CIBIL score ranges and what they mean for a borrower.
800 and Above
If your CIBIL score is above 800, you have an excellent credit score. Borrowers who pay their credit bills and EMIs on time, do not clear only the minimum due but the entire balance due on their credit card each month and who borrow money only when they need it and pay it back responsibly have such a CIBIL score. The impact of CIBIL score ranges is such that an excellent CIBIL score ensures quick approval, high negotiating power, and in general, lucrative loan terms and conditions.
Also Read: How to Increase Your CIBIL Score Above 800?
751 to 800
Such a CIBIL score is called a good credit score. Borrowers who are financially responsible and have only made one or two mistakes in the past regarding repayment, fall under this category. A good credit score ensures quick approval and favourable loan terms and conditions. Lenders may offer good deals to such borrowers.
701 to 750
Such a credit score is called a Fair Credit Score and indicates that the borrower is average with his money and can be trusted with loan repayment by considering other factors. Lenders may offer slightly higher interest rates or higher repayment tenor.
601 to 700
If your CIBIL score ranges between 601 and 700, you have quite a low CIBIL score. Lenders are wary of such people and do not extend them credit. One way such people can avail themselves of credit is by adding a co-borrower with an excellent score or a guarantor of great social and financial standing to their application.
Anything under 600 is considered bad and if your CIBIL score falls in this range, there is no chance you will get approved for a loan. In this case, your only option is to increase CIBIL score by practicing strict financial discipline and then apply for a loan.
Also Read: How to Increase Your CIBIL Score Above 800: 7 Proven Methods
If you are planning to apply for a loan in near future, check CIBIL score and make sure it is at least 750 before beginning the loan application process. If your credit score is below 750, work on improving it and then apply for a loan. Improving your credit score would require you to develop an understanding of the factors that affect it. Our next section deals with this.
Factors that Affect a Borrower’s CIBIL Score and Tips on How to Increase CIBIL Score
Payment History
Your payment history makes up 35% of your credit score and is, therefore, important. Many borrowers do not know this but even a single missed EMI payment can push down your credit rating by almost 100 points. So, borrowers must always clear all payments on time. Set up reminders for your due dates or register for auto-payments if you want to increase CIBIL score.
Credit Utilization Ratio
The Credit Utilization Ratio is the ratio of the balance used to balance available. The credit utilization ratio is important as it tells lenders how a borrower uses their credit cards. Ideally, borrowers should never exhaust their credit cards and maintain their credit utilization ratio under 30%. Not many people know this but when borrowers pay only the minimum due on their credit cards for months, their credit utilization ratio goes down.
Credit Mix
Borrowers who want to maintain a healthy CIBIL score must maintain a healthy mix of credit in their credit kitty. This means borrowers should never take the same kind of loans or credit cards. They must try to find a balance between secured and unsecured loans as this convinces a lender of a borrower’s ability to handle all kinds of credit.
Also Read: Credit Mix: Different Types of Credit that Boost Your Credit Score
The Length of Your Credit History
The length of your credit history also impacts CIBIL score ranges; the longer your credit history, the better your credit score. It is for this reason that borrowers are advised to maintain all old loan accounts. Closing old loan accounts erases one’s credit history. Let us now look at some of the frequently asked questions on this topic.
Frequently Asked Questions
If you are planning to apply for a loan, you must maintain a good CIBIL score. So, what is a good credit score range? For loans and credit, lenders consider anything between 750 and 900 good.
If you are planning to apply for credit anytime soon, you must avail of your credit report. You can have CIBIL send you your credit report on a monthly or six-monthly basis by opting for a plan and paying them a small fee.
If your CIBIL score is in the poor range, do not worry. An individual’s CIBIL score is not absolute. By practicing proper financial discipline, you can push your credit score to an excellent score. Remember to pay all your credit bills on time, maintain a low credit utilization ratio, borrow money only when needed and maintain a healthy mix of different types of credit. Do this for a few months straight and you will see a change in your CIBIL score.
If you want the most reliable CIBIL score and CIBIL report, you must apply to TransUnion CIBIL. However, if you want to check your credit score without paying any CIBIL score charges, you can do so by going to one of the many websites that offer this facility for free. You will be required to enter your Aadhar or PAN details. This will help the website identify your credit profile. However, rest assured that the information provided with stay safe with the website you are using.
