What importance does the Credit CIBIL Score holds in your Creditworthiness?

What importance does the Credit CIBIL Score holds in your Creditworthiness?

All over the world, as they say, that lending is the future. But have you ever thought how did it happen exactly? It happened because of the fact that the borrowing capacity of people have increased with each consecutive year.

Everybody needs credit at one point in their lives. It may be a personal loan, home loan, vehicle loan, or even the credit card. It doesn’t matter what kind of credit facility you need, there is one thing that will always determine the fact that whether you will get the credit facility from any lender or not.

This factor is your credit CIBIL score. If you are wondering what is this thing or you are listening to this term for the first time, then don’t worry about it. Because in this article, we will be telling you about all the details of the CIBIL score and what are the details that your ​credit report​ contains. So if you are someone who wants to learn about personal finance and how a score can impact your personal finance then this article could be eye-opening for you. So keep reading!

What is CIBIL Score?

Before getting on with the importance of the ​credit CIBIL score​, it’s important for you to know what this term is. Your CIBIL score is nothing but a 3-digit mathematical representation of your creditworthiness and past repayment behavior given by the leading credit rating agency of India - Credit Rating Information Bureau of India Limited (CIBIL). The score ranges from 300 to 900. A score of 700 or above is considered to be a good CIBIL score and similarly, a score below this is considered to be a poor score.

You can get your credit score by asking from a credit report from any of the credit rating agencies. Your credit report will include all the financial information such as transactions, existing loans, existing ​credit cards​, total outstanding balance, total dues, and many other things.

Why the CIBIL score has such importance in lending?

As we told you that your CIBIL score gives an idea about the creditworthiness. What this means, that a person with a high Credit CIBIL score will have high creditworthiness in comparison to a person with a low score. That’s why lenders always check for the credit score before giving any kind of credit facility to any customer.

When you have a high CIBIL score, it means that you are good at handling your debts and have a good repayment behavior. This is the sole reason which makes the lender trust you. Any lender would like to have as little risk as possible when it comes to giving credit. Having a good credit score also gives you the opportunity to get less interest rate as compared to a person with a low score.

What are the ways to imporve your Credit Score?

● One of the best ways to improve is to pay your outstanding ​credit card​ dues on time. Don’t make a habit of paying them on the due date or only paying the minimum due amount. This habit will entrap you in the revolving credit which might be harmful to you. ● Never do the multiple inquiries for a loan in a short period of time. It will nothing but impacts your credit score negatively. ● You can also imporve your credit score by using your credit card in a positive way. Always maintain the credit utilization ratio of 30% to 40%.