Your CIBIL score plays a crucial role when it comes to availing various financial services such as loans and credit cards, as it showcases your creditworthiness.
It is especially important when you’re keen on borrowing a collateral-free loan, as it instils confidence in the lender regarding your repayment abilities.
Therefore, it is advisable to improve your score before applying for such financial services to avoid rejection, which can further harm your score.
However, before you take any action, it is important to understand everything about credit score and how it’s calculated so that you can take targeted measures to improve it if need be.
What is the CIBIL score range?
CIBIL score is a number ranging from 300 and 900 that denotes your credit behavior and management abilities.
TransUnion CIBIL Limited, a credit bureau that issues credit scores, determines your CIBIL score by taking into account various financial details.
A score above 750 is considered to be an excellent score, while a score between 650 and 749 is a good score. A CIBIL score ranging from 550 and 649 is fair, below which it is considered to be a poor score.
You may also get an ‘NA’ or ‘NH’ in your credit report, which stands for ‘not applicable’ or ’no history’ respectively.
These state that either you have never taken a loan or used a credit card and hence have no credit history or score.
How does CIBIL calculate your credit score?
CIBIL score calculation takes into account these 4 major components:
- Payment history: 30%
- Credit exposure: 25%
- Credit type and duration: 25%
- Other factors: 20%
The way you have managed credit in the past makes up 30% of your CIBIL score. The impact of your repayment can lower your credit score by 100 points. Therefore, you must avoid repayment delays and loan defaulting at all costs!
The amount of credit you use in proportion to the available credit limit is known as the credit utilization ratio.
You must try to avoid using more than 30% of your credit limit. Lenders usually avoid offering loans to borrowers with heavy credit usage as it increases the possibility of defaults.
Credit type and duration:
Credit type and duration contribute to 10% and 15% respectively to your CIBIL score. Having just one type of credit (secured/unsecured) or avoiding the use of credit altogether can harm your credit score. Therefore, having a balance of both types is key.
Similarly, credit duration is directly proportional to your CIBIL score. A long, successful repayment history shows that you’re experienced at handling credit and contributes to a better CIBIL score.
Other factors affecting your credit score include the number of hard inquiries made. When you apply for a credit card or loan, lenders request your CIBIL report from the credit bureau.
How to check your CIBIL score?
You can check your credit score once a year for free from the official TransUnion CIBIL website. Should you want to access it more frequently, you can do so by paying a fee. Here are the steps you need to follow to check CIBIL score:
- Go to the official CIBIL site
- Click on ‘Free annual CIBIL score and report online’
- Fill in the form to create an account and click on ‘Accept & continue’
- Enter the OTP sent by CIBIL to verify your identity
- Thereafter, your credit information report will be displayed on the screen along with your score.
You can also check CIBIL score online without login for free by visiting Bajaj Finserv’s website. You can simply visit their free CIBIL capability to get this information in minutes.
Now that you know how to check your score in a few steps, don’t forget to do so before applying for financial services like loans.
To avail a personal loan faster, apart from maintaining a good credit score, consider selecting a lender that has easy-to-meet personal loan eligibility criteria such as Bajaj Finserv.
The NBFC offers a loan of up to Rs.25 lakh at competitive interest rates over a flexible tenor of up to 5 years.
You can also borrow on the go and pay interest only on what you use via the Flexi Loan facility.
In addition to checking your CIBIL score, also remember to check your pre-approved offer from Bajaj Finserv. The customized deal enables you to access funds instantly, in no time at all.