What Is CIBIL Score And How It Affects You?

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CIBIL stands for Credit Information Bureau India Ltd, it is country’s leading Credit Information Company. The company is responsible for maintaining records of loans and credit card payments of both the individuals and companies. CIBIL receive records from the banks and various financial institutions each month. Using this information, CIBIL generates CIR (Credit Information Report) and credit score both for the individuals and the companies. They further share these reports with the lenders for evaluating and approving the loans.

As for the CIBIL score, it is a 3-digit number ranging from 300 to 900. On the basis of the CIBIL score, your creditworthiness will be judged and it also proves how good you are with managing credit cards and loans. As per the guidelines of RBI (Reserve Bank of India), banks and other money lending institutions should consider your CIBIL score before they approve or reject an application for a loan and credit card.

By now, you must have realized the significance of CIBIL score. If you are still leading your life with that better-late-than-never attitude, then this may impact your credit score. Amazed? Well, good and bad scores do affect you even after your school days. CIBIL is responsible for tracking your credit history. It is responsible for assessing your creditworthiness like I have just mentioned above.

There are certain factors that affect your CIBIL score, allow me to discuss them in detail.

High Utilization Of Credit Limit

With the rise in the current balance of your credit card, this is a clear indication that you are under the burden of repayment. Well, what’s worse, it can affect your CIBIL score. It is important you stick to the lower side of the limit; this will prove helpful in increasing your score. It certainly pays not to use too much credit, particularly in this case.

Repayment History

If you have been making timely repayments, then guess what, it will reflect on your CIBIL score. When you have a habit of clearing all your bills and loan repayments before the due date, then this will have a positive effect on your CIBIL score. On the other hand, if you have any missed payment or overdue payment, then this will negatively affect your score as this suggests that you are not responsible enough to service your obligations.

Credit Applications

We all are a part of modern and advanced lifestyle. People can be seen applying for multiple loans and credit cards, such people are of the view that all these are a part of a lavish lifestyle. But, being credit hungry can ruin your CIBIL score. Banks and various credit institutions keep a close check on individuals who repeatedly apply for credit cards. This behavior is suggestive of that such individuals have increased debt burden and they are not in a position to honor the additional debt.

Avoiding Using Credit Card

Most of the people are of the view that credit cards are responsible for careless spending and bad credit habits. If there is a lack of credit transactions or if there are no transactions, this really makes your credit file inactive and this will also reduce your CIBIL score.

Frequently Increasing Credit Limit

If you have been frequently requesting to have a higher credit limit, then beware that it can affect your CIBIL score negatively. During this process, your bank or financial institution will ask CIBIL for your reports. This is termed as a hard inquiry and this will hit your credit score. Thus, make sure you request for higher credit limit only when you need it.

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