India’s first credit bureau or credit information organisation, Credit Information Bureau (India) Ltd (CIBIL), has, since 2001, sought to increase the efficiency and transparency of the credit industry. CIBIL continues to be the most known credit information company despite the Reserve Bank of India issuing licences to three other organisations, namely Highmark, Experian, and Equifax in 2010.
The CIBIL score, often referred to as the credit score, is a numerical representation that is based on the examination of a person’s credit reports. The three-digit number, which ranges from 300 to 900, represents a person’s credit history. The credit report, which includes the credit history, is the foundation upon which the score is determined.
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It serves as a representation of a person’s creditworthiness and is mostly based on data from credit reports, which are frequently obtained from credit bureaus like CIBIL.
Banks and credit card or loan-granting organisations provide the scores to assess the possible risk of lending money to consumers and to establish methods to prevent losses caused by bad debt.
A CIBIL score runs from 300 to 900, with 300 denoting a poor score and 900 being the best possible score. To receive the best offers on interest rates for loans, you should have a CIBIL score that is closer to 900. Most lenders, including banks and non-banking credit organisations, consider a CIBIL score of 750 and above to be optimal.
Here are a few tips to build up your CIBIL score:
Avoid making late payments
If you have been postponing payments on any debts, you should make it a point to start paying them on time. Delaying any loan or credit card EMI instalment harms your CIBIL score, thus you should avoid doing so.
Don’t constantly apply for credit if rejected
Your credit report will contain information on any loan or credit card applications you have made and were denied. If you apply right away to a different bank, they can reject your application after noticing your low CIBIL score and the previous denial.
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Maintain your credit utilisation ratio
A borrower should keep their credit usage rate under 30 per cent of their overall credit limit by distributing the cost of expenditure over several different credit products. Your credit score will increase and be maintained as a result of reducing your credit use ratio, which will ultimately help you and increase your financial security.
Do not exhaust your available credit limit
Avoid exceeding your credit limit, as this raises your credit use ratio, lowering your CIBIL score. In case of the expenditure exceeds the limits regularly, one could try asking the bank to raise the credit limit.
Limit your borrowing to a bare minimum
Your credit score is likely to suffer if you submit too many loan applications or consistently use your credit card close to its limit since these actions show that you are looking for ways to boost your credit score. The best course of action is to avoid borrowing money unless it is required and to avoid exceeding your credit card constraints.
