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how your credit rating cibil works

how your credit rating cibil works

cibil score is a three-digit numeric summary of your credit history on your bank accounts. It is a critical factor if you apply for loans & being reviewed or approved.
January 26, 2021
6 min read
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how your credit rating cibil works

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the credit rating against your bank accounts' transactions is a critical factor if you apply for loans or a credit card. in india, transunion cibil limited generates your credit rating / cibil score.

the way you handle credit in financial dealings affects your credit rating / cibil score. if you fall back on your monthly instalment for your car loan, it will reduce your credit score.  

a bad credit rating can harm your lending prospects. but maintaining a good credit rating is easier than you could imagine. here are some tips that'll set you in the right direction:

tips to increase your credit rating

make timely payments

your credit rating / cibil score depends a lot on whether or not you default on loan payments. don't miss out on a single payment that falls due for a good credit rating.

clear your monthly credit card bill in full

paying only the minimum balance on your credit card bill seems like a feasible option, but it's an expensive trap. 

instead, you could arrange for a standing order with your bank to clear the full amount on or before the bill's due date.

do not use your credit card to withdraw cash

using your credit card for cash reflects on a desperate financial situation, which implies that you aren't financially responsible

moreover, you will have to pay the credit card company massive interest on the amount you withdraw.

keep your credit balance low

if you max out your credit card quite often, it shows that you are unable to manage with your own money. using your card sparingly can earn you a good credit rating / cibil score.

maintain a healthy credit mix

consider the types of loans that you take. a combination of secured loans (like for a house or a car) and unsecured loans (personal loans or credit cards) reflects financial maturity.

avoid debt settlement agreements

some credit card companies offer this arrangement to help you reduce your debt. again, this reflects your inability to manage your finances and should be avoided.

maintain old cards

even an old card traces a line of credit to the credit bureaus. hence, maintain these cards on a minimum basis. the credit history that such cards generate can positively impact your credit rating / cibil score.

the easy way to get your credit rating

in the humdrum of daily life, you may find it challenging to monitor your credit rating regularly. fortunately, if you use an app like cred, you can get help with your credit transactions to keep you out of the red.

cred is an app that helps you track your expenses and due dates. you also get regular alerts and notifications about the status of your account.

the app also rewards you with "cred coins" if you pay your credit cards through them. you can redeem these points for various lifestyle products and services.

it is an excellent incentive to use your credit card regularly but responsibly, as you can earn a few extra rupees every month.

cred's interface is user-friendly and straightforward. the app is completely secure, and you are assured of complete privacy in your transactions. 

to qualify for the cred app, you need a credit score of 750 or above. cred operates on your real-time credit score, so you can always be sure of maintaining a good credit rating / cibil score with this app. 

credit rating faqs

here are a few common faqs about credit ratings:

what is a credit rating?

a credit rating is an assessment of a debt instrument in both qualitative and quantitative terms. it is expressed as a number. in india, transunion cibil limited generates this score known as the credit rating / cibil score.

what is the difference between a credit rating agency and a credit bureau? 

if you want an opinion regarding future debt repayments, approaching borrowers from a credit rating agency is your best bet. 

in stark contrast, the information concerning historical payments falls under a credit bureau's purview.

what are the elements of a credit rating?

A credit rating / CIBIL considers several factors like the financial strength of the subject, with an in-depth analysis of the credit history and income generation, among many other factors.

who regulates credit rating agencies?

in india, the securities and exchanges board of india (sebi) regulates credit rating agencies in line with the sebi (credit rating agencies) regulations 1999. 

does the sebi play any role in credit rating?

No. Credit ratings are unbiased and independent results from a credit rating agency. 

The SEBI will not interfere in an agency's decisions unless it conflicts with the SEBI provisions (Credit Rating Agencies) Regulations, 1999.

what is a provisional rating?

a provisional rating will have the prefix of "provisional." it indicates that the rating is assigned based on expectations, and the final steps in the documentation are yet to be completed.

how long does the credit rating process take to complete?

the process of generating a credit rating takes about three to four weeks from the date that all relevant information is received.

can we appeal if we not happy with a rating outcome?

in case of dissatisfaction, it is possible to appeal against a decision. the redressal process will be as per the rating process manual and in line with the sebi regulations, 1999.

maintain a good credit rating for better financial health

as you can see, it is imperative to keep your finances under control to maintain a good credit rating. with the above useful tips, you can ensure that your credit rating is favourable at all times.

financial apps like cred makes sure that your credit rating / cibil score is good to start with. since the app uses data from your real-time credit rating, you'll always be in the know regarding your credit profile.

cred can help to keep your credit rating healthy and on track. download the cred app today to ensure that your lending profile continues to be favourable with your lenders.