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Require a loan? Here is what you need to know about your CIBIL score

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Require a loan? Here is what you need to know about your CIBIL score
October 08, 2018
Credit health is a very important factor in determining your financial freedom. At one point or the other, you may require a loan for meeting a specific purpose in life. As such, it is very important that you maintain a good credit health for enhancing your eligibility for a loan. CIBIL score is a primary indicator of your financial well being, as it denotes your complete candidacy for the crediting agency. Whenever you apply for a loan, banks check your CIBIL Score and Report to evaluate your credit history and credit worthiness. The higher your score, the better are the chances of your loan application getting approved.

CIBIL score is a critical factor in loan application process. The CIBIL Score plays a critical role in the loan application process. After an applicant fills out the application form and hands it over to the lender, the lender first checks the CIBIL Score and Report of the applicant. If the CIBIL Score is low, the lender may not even consider the application further and reject it at that point. If the CIBIL Score is high, the lender will look into the application and consider other details to determine if the applicant is credit-worthy.

This means that CIBIL score is the first step or the initial gateway before other factors can be checked and the application processed. CIBIL score is a three digit number and ranges from 300 to 900. A higher score (i.e. a score closer to 900) means a higher probability of getting your loan approved.

Calculation of CIBIL score is done through consideration of several factors. These factors are listed under:

  1. The applicant's repayment history:

    The repayment history accounts to 35 percent of the score. Therefore you need to clear all your bills and loans well within the due date to maintain a good repayment history. If you default even once, it will negatively impact your score.

  2. The credit balance:

    The amount you owe to the lender accounts to 30 percent of the CIBIL score. There are two considerations with regard to this, the first being the total credit limit that is being sanctioned to you and the second being how much of the credit have you utilized.

  3. The amount of time for which you have used credit:

    This is an important factor as well and it accounts to 15 percent of the score. If you have been servicing the loan for a longer period and handled it responsibly and made timely payments, then it will positively affect your CIBIL score.

  4. New credit that you have applied or taken:

    This accounts to 10 percent of the credit score. Each time you apply for a credit, the lender will run a credit check on you and if there are too many inquiries going through, it will negatively impact your credit score.

  5. Credit mix:

    This accounts to another 10 percent of the CIBIL score. If you are avoiding credit like a plague and just opted for a single type of credit, it is not helping you have a good credit score.

For further details and to check your CIBIL score

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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