What Is CIBIL Score and Why Does It Matters?

CIBIL score represents the creditworthiness of an individual or a company. It is a three-digit number that ranges between 300 and 900, with a higher score indicating better creditworthiness. The CIBIL collects and maintains the credit information of individuals and companies, which is used to calculate their credit scores or CIBIL score status.

CIBIL scores are widely used by banks, financial institutions, and other lending agencies to assess the creditworthiness of borrowers and determine their eligibility for loans and credit cards. A good CIBIL score is important for individuals, along with understanding  what is CIBIL  score as it increases their chances of getting approved for loans and credit cards at lower interest rates and favourable terms. 

Importance of CIBIL score

The CIBIL Score is a crucial tool that enables borrowers to better understand their credit standing. A high CIBIL score status typically indicates a successful financial history, while a low CIBIL score status signifies poor creditworthiness, making it challenging for applicants to secure bank loans. A good CIBIL Score can help applicants obtain loans at lower interest rates and with minimal documentation. The CIBIL Score plays a crucial role in determining the interest rate offered by banks and financial institutions to a borrower, with higher scores usually resulting in lower rates and lower scores potentially leading to higher interest charges.

Listed below are the steps to check your CIBIL score status online 

  • Visit the official website of a financial institution such as Bajaj Finserv to check your CIBIL score status.
  • Search for the “Check Score” option and click on it to proceed.
  • Log in using your mobile number and wait for an OTP sent to you.
  • Enter the OTP to verify your mobile number.
  • Provide all the required information, such as your name, date of birth, PAN card number, and contact information, to check your CIBIL score status.
  • Before submitting the form, review it and ensure that all the information entered is accurate.
  • After submitting the form, your CIBIL score will be generated, and you can view your CIBIL score status on the dashboard.

Important factors affecting the CIBIL score 

When learning about the basics of “what is CIBIL score”, it is very important to understand about the factors affecting CIBIL score.

  • Payment history 

If an individual fails to pay their loan installments or EMIs on time or defaults consistently, their CIBIL score will decrease.

  • Credit mix

A balanced mix of secured and unsecured loans will keep the CIBIL score positive for the applicant.

  • Loan enquiries 

The score can be negatively affected if the applicant’s report shows multiple credit enquiries or loan rejections.

  • Credit utilization

If the credit card balance usage is high, it indicates that the holder is in more debt, which can hamper their CIBIL score.

Essential tips to improve the CIBIL score 

It is essential to understand the vital tips for improving the CIBIL score when acquiring knowledge about the fundamentals of “what is CIBIL score.”

Make sure to repay your debts promptly

Making timely payments on your outstanding debts is crucial to avoid harming your credit score. You can do this by paying your EMIs on time and regularly checking your CIBIL score online on Bajaj Finance Credit Pass service.

Verify your credit report for inaccuracies

Even if you believe that you have a positive credit history, there may be errors you are unaware of that could harm your credit score. By understanding what CIBIL score is and correcting these errors, you can anticipate an immediate improvement in your credit score.

Maintain a varied credit portfolio

You should have a well-balanced mix of secured and unsecured loans. Banks and financial institutions prefer individuals with a higher percentage of secured loans, which credit bureaus also give higher credit ratings.

Decrease your credit utilization ratio

It is best to avoid using your credit card to its maximum limit to enhance your credit score. Keeping a low credit utilization ratio of preferably 30% or less is advisable.

Conclusion 

CIBIL score is an essential parameter in determining an individual’s creditworthiness. A higher CIBIL score status indicates a better credit history and enhances the chances of securing loans and credit facilities at attractive interest rates. The score is calculated based on an individual’s credit history, including credit card usage, repayment history, and outstanding debts. Maintaining a good CIBIL score status is crucial in today’s world, along with knowing what is CIBIL score. A good CIBIL score opens up several opportunities and helps individuals achieve their financial goals.

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