CIBIL score is a three-digit numerical representation of an individual’s creditworthiness. The score is based on an individual’s credit history and repayment behaviour. The Credit Information Bureau India Limited (CIBIL) is India’s first credit information company that maintains credit records of individuals and commercial entities.
The CIBIL score is one of the most important factors banks and other financial institutions consider while evaluating a loan or credit card application. So, it is important to understand the CIBIL score meaning and the important steps to check the free CIBIL score online before applying for loans and credit cards in India. A healthy CIBIL score provides financial freedom and access to various financial products with competitive interest rates.
Importance of CIBIL score
The CIBIL Score is an essential tool that helps borrowers better understand their credit status. A successful financial history usually yields a higher CIBIL Score, while lower scores signify lower creditworthiness. However, if an applicant understands the CIBIL score meaning and has a good CIBIL score, they may be granted a loan at a lower interest rate and with minimal paperwork. Conversely, banks may reject your application or provide a higher interest rate loan if an individual has a low CIBIL score. While understanding the significance of the CIBIL score meaning is crucial, it is important to note that banks and financial institutions also take into account other factors when assessing loan applications
Listed below are the factors affecting the CIBIL score
To understand the CIBIL score meaning, it is essential to have knowledge about the following factors that affect the CIBIL score
- Payment History
The CIBIL score decreases if an individual fails to pay their loan instalments or EMIs on time or defaults consistently.
- Credit Mix
The CIBIL score will remain positive if the applicant has a balanced mix of secured and unsecured loans.
- Loan Enquiries
The report’s multiple credit or loan rejections can affect the score negatively, and also if the individual has recently availed of multiple loans.
- Credit Utilization
The CIBIL score is hampered if the credit card balance usage is higher, indicating that the holder is more in debt.
Steps to check free CIBIL score online
- Visit the official website of a financial institution like Bajaj Finserv to check your free CIBIL score online.
- Search for the “Check Score” option and click the link to proceed.
- Login using your mobile number and wait for an OTP to be sent to you.
- Enter the OTP to verify your mobile number.
- Fill in all the required details, such as your name, date of birth, PAN card number, and contact information, to check your free CIBIL score online.
- Before submitting the form, review it and ensure that all the information entered is accurate.
- Once the form is submitted, wait for your CIBIL score to be generated, which can be viewed on your dashboard.
Important tips to improve the CIBIL score
- Ensure prompt repayment of debts
Making timely payments on your outstanding debts is important to avoid negatively impacting your credit score. Paying your EMIs on time and regularly checking your CIBIL score online is essential.
- Check credit reports for inaccuracies
While you may believe that you have a positive credit history, there may be unknown errors that can adversely affect your credit score. You can expect to see an immediate improvement in your credit score by correcting these errors.
- Maintain a diversified credit portfolio
Having a balanced mix of secured and unsecured loans is recommended. Banks and Financial Institutions prefer individuals with a higher proportion of secured loans, which also receive higher credit ratings from credit bureaus.
- Reduce the credit utilization ratio
It’s best to avoid using your credit card up to its maximum limit to boost your credit score. Maintaining a low credit utilization ratio of preferably 30% or less is advisable to understand the CIBIL score meaning.
Conclusion
In India, understanding the CIBIL score meaning is integral to personal finance management. It measures an individual’s creditworthiness and helps financial institutions assess loan risks. A high CIBIL score usually indicates a low-risk borrower and vice versa. Individuals must strive to maintain a good credit history and high CIBIL score by paying their bills on time, avoiding defaults, and understanding the basics of CIBIL score meaning. Individuals should regularly check free CIBIL scores online and take the necessary steps to improve their scores. Borrowers can also utilize Bajaj Finserv Credit Pass online service to check their CIBIL score online.
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