Mr X and his wife, Mrs Y, were a DINK (double income and no kids) couple. both of them earned well, and with no responsibility of kids, could afford a luxurious lifestyle. gifts for birthdays and anniversaries meant shopping only from luxury brands. vacations meant flying overseas or indulging in only the finest experiences around the world.
they were in for a shock when they applied for a home loan. despite the hefty amount that was coming into their accounts every month, the bank declined their loan applications. they visited several banks, but the answer remained the same. it was because their CIBIL score was unsatisfactory.
it turned out they had been missing their credit card payment dates. although they would repay the amount with interest, they never realised the impact it was having on their creditworthiness.
several people make such mistakes and find themselves on the wrong side when they apply for new credit card. the best way to avoid such detrimental situations is by checking your CIBIL score regularly.
CIBIL is short for Credit Information Bureau (India) Ltd. it is a premier agency that provides credit reports and scores of individuals. to do so, it collects the financial information of individuals from banks and other financial institutions.
the information that it collects demonstrates the credit behaviour of the individual. for instance, it gathers the data of all the credit cards and loans that the person has taken. furthermore, it collates the data if the person has been regular with the EMIs of the loans and the credit card bill payments.
based on this information, it gives a three-digit score to the individual, which is commonly known as the CIBIL score. this number varies 300-900 and a score above 700 is generally considered good. a score above 750 can get all your loan and credit cards applications approved. of course, provided that everything else is in place.
when you visit a bank or a non-banking financial institution with an application for new credit, they check your CIBIL score. if it is not satisfactory, they consider you to be in a high-risk category. it means that any credit extended has a high chance of turning into a bad loan. owing to this, they may refuse to grant you credit.
as mentioned above, your CIBIL score depends upon your credit behaviour. here is a list of the factors that impact this credit score.
1. loan repayments
the way you have been repaying your past loans have a key role to play in your CIBIL score. it includes consistently paying all your credit on time and in full. delays in payments can impact your score negatively.
2. defaults or write-off
when you default on your loan or your lender writes-off your loan, it adversely affects your credit score. it is an indication that you are incapable of clearing your credit. in this scenario, no lender will be keen on extending credit to you.
3. credit as a percentage of income
if this ratio is high, your CIBIL score will be low. a lower percentage means there is more room for you to clear your loan.
4. credit card balance
a lot of people are not aware, but a high credit card balance can lead to a lower CIBIL score. it is because it indicates that you need more credit. thus, it is advisable to connect with your bank and reduce your balance to a reasonable limit.
5. credit inquiry
every time you inquire about a credit card or a loan, it gets stamped on to your credit report - and as a result, your score dips. if you are scanning the market for the best interest, it is advisable to do it over some time.
since January 2017, the central bank of India, RBI, has mandated that every individual can check their credit report and credit score for free once every year.
if you're wondering how to check your CIBIL score online, this step-by-step guide walks you through the whole process.
don't let your CIBIL score fade into the background - you should check your report regularly. it will allow you to spot discrepancies that you can take up with the credit agency or lender.
if you notice that your CIBIL score is unsatisfactory, it is recommended to take the necessary steps to correct it. it is also advisable to not apply for any fresh credit during this time as it will only end up impacting your score negatively.
this article offers a detailed answer to your query of how to check your CIBIL score. however, there are four such credit agencies in India that collect your information and offer assistance to banks. you may want to check your score with those agencies as well to avoid any surprises.