A credit score is the unique identifier given to each borrower when he/she applies for credit. The credit score is the outcome of an algorithm-based system that rates a person’s eligibility for credit based on his/her income, assets, and debts. Credit Bureaus provide a credit score, and one of the bureaus is Credit Information Bureau India Limited or CIBIL. A credit score is an important score for borrowers looking for a personal loan. It can have a direct impact on the approval or rejection of an application.
So, every borrower must know all that there is to know about the score. What are the things they should consider when filing their loan application?
Let us tackle these individually.
What is CIBIL, and what is a CIBIL score?
CIBIL score is an instrument developed to measure consumers’ ability to repay debts. The CIBIL Score was developed as part of a consortium of banks. A score card was designed to aid bankers in deciding the worthiness of a loan application by the borrower, which accurately matched a borrower’s CIBIL score with the credit profile and track record of their lending company.
In other words, a CIBIL score determines how likely a borrower is to repay the loan. According to CIBIL, the expected length of repayment of a personal loan is 60 months. Borrowers looking for a personal loan can check their CIBIL score to compare it with other applicants. The credit score considers information about the borrowers such as credit card or loan status, collections, payments history, etc.
How can you check your CIBIL score?
The trick with a CIBIL score lies in the way you can estimate your personal credit score by using the CIBIL website. So, if you are applying for a Fullerton India personal loan online, you can first generate your personal credit score at the CIBIL score website.
Upon generating your score, the calculated score will show your real CIBIL score. This is an easy way to check CIBIL score.
- In the section on ‘How to calculate your credit score’, you can enter the basic information about your bank account like your name, account number, branch, IFSC code, mobile phone number, email address and security question.
- In the next step, enter your name, address and mobile number.
- After providing all the details, a copy of your credit report will be generated.
You can also approach your lending company to know the credit score by CIBIL, and it will help you determine the your personal loan eligibility.
What are the factors that affect a CIBIL score?
Most of the criteria used to calculate a score are based on the borrower’s income. There are five different ranges used for calculating a CIBIL score.
- Ideally, a person who earns more than Rs1.5 lakh per year should expect a CIBIL score of over 700.
- Anything below 750 is considered to be average. Anything above 800 will be considered as ‘outstanding’.
- A CIBIL score of between 600 and 750 is considered average.
- Anything below 600 is considered to be sub-standard.
- Anything between 0 and 500 is considered ‘poor’ and anything between below 50 to below 500 is considered ‘poor’.
What is the effect of CIBIL score on a personal loan?
For personal loans, the credit scoring company – CIBIL scores the borrowers on their repayment track record in the past five years. This is called the credit report that the CIBIL company produces. CIBIL does not score the borrower’s income because the Income-tax authorities come in for this. But, CIBIL scores each individual’s repayment track record based on various kinds of criteria.
Here is a list of things that you should think about when you file your loan application and check your CIBIL score:
- Credit score
- Payoff record
- History of rejection
- Recovery rate
What are the advantages of a CIBIL score?
There are many advantages of a CIBIL score and some of them are
- It helps you get personal loan quickly and that too at a lower interest rate
- A good credit score improves your chances of a quick personal loan approval
- Makes you eligible for many pre-approved loans
- A good credit score gives the lending company a reason to trust you with a loan
All in all, knowing the information about the CIBIL score can help you make the right decision when applying for a personal loan. So, go through the CIBIL score to know what you need to know before taking Fullerton India personal loan application online. Keep in mind that while a credit score is essential, it is also important to make sure that you file your application correctly; and that the documentation meets the lending company’s requirement.