4 Factors That Decide Your Cibil Credit Score

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By Sunil Fernandes

Updated: Monday, May 23, 2016, 12:42 [IST]

As you are aware credit scores are the most important indicators that banks look for when individuals apply for loans.

There are various companies that provide credit scores in India and one among them is the Credit Information Bureau Ltd or popularly known as Cibil.

Today, a lot of banks and financial institutions look at your Cibil Credit Score before you apply for a loan. It is therefore, important to have a good Cibil Credit Score, or else your loan application will get rejected.

What Does Cibil Do?

The company collects your payment information each month and informs banks and other financial institutions about the same. This helps Cibil to create and prepare a credit score, which it then shares with these banks and financial institutions.

It is extremely important to understand that this institution does not track your investments. It has no right to do so. It only collects your payments and creates a credit history from that.

Smart tips on how to imporve your credit score?

How the Cibil Score Helps in getting loans?

Based on the past track record of payment, credit history and amount of loans availed, a rating is assigned. These ratings are anywhere between 300 and 900. If an individual has a rating in excess of 750 points, there is absolutely little chance of being declined a loan, unless he does not fulfil other criteria.

Factors that decide your Cibil Credit Score

As we indicated that it is just not payment history, that will provide your Cibil Credit Score. There are a host of other considerations that Credit Information Bureau takes into account, before it comes up with a credit rating.

Take a look at the factors:

a) Payment history

If you have been paying your instalments on loans and credit cards regularly, be rest assured that Cibil would make a note of it. If you have defaulted regularly, it could dramatically bring down credit score.

b) Amount of credit that you take

If you are credit hungry, it will show in your credit score. For example, if you initially began with a home loan, but, now have a home loan, consumer loan and also credit card outstanding, it could lead to your credit rating coming down. So, higher the number and amount of loans, the worse it could be.

3) Type of debt

You would be inclined to say that debt is debt and what does the type of debt got to do with anything - actually, it does.
If you have debt which is not secured in the sense credit cards outstanding, high amount of personal loans, it could weigh on your credit. However, if you have a lot of secured credit like home loans, that could be much better.

4) Credit applications

The higher the number of applications made, the worse it gets for your credit score. If there are more rejections, it would reflect poorly.

Cibil charges a small amount to know your credit score. You can check the same before you take a loan the next time. This would avoid the hassle of you running around to get a loan approved and only later know that it has been declined.

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