Every human being desires to grow and prosper in life; it is the ultimate goal of every human being to grow, prosper, and live a good life. In the past, people worked hard and tried to save money from their earnings so that they could use it when they needed it. However, borrowing money from banks was difficult, therefore many people had to borrow money from people they knew who were wealthy at exorbitant interest rates.
Things have changed dramatically since India’s economy was opened to the rest of the world. The expansion and competitiveness of banks and other financial institutions lending has become a typical occurrence. People nowadays borrow money to start a business and meet their working capital needs; parents borrow to fund their children’s education, purchase a vehicle, or acquire their dream home, and so on. But, have we ever pondered how banks or other lending institutions lend their money, their true criteria for giving loans, and whether financial institutions charge a lesser interest rate on loans made to those with a higher CIBIL score? Let’s learn more about CIBIL score checks online. There are various ways online for CIBIL score check free.
What is the Role of the Credit Rating Agency?
A rating agency evaluates a company’s or an individual’s financial status, particularly their ability to repay principal and interest payments on their loans. The credit rating provided to a debt reflects an agency’s confidence in the borrower’s ability to meet its debt obligations as agreed.
Various credit rating agencies in India provide credit scores to individuals and businesses and allow people to initiate CIBIL score check free. The Securities and Exchanges Board of India (SEBI) regulates these agencies. Experian, Credit Rating Information Services of India Limited (CRISIL), ICRA, ONICRA, Credit Analysis and Research Limited (CARE), TransUnion CIBIL, and others are some of India’s major rating companies operating in India.
What are the Functions of CIBIL?
The Credit Information Bureau of India Limited (CIBIL) was India’s first credit information company, established in 2005 under the Credit Information Companies Regulation Act. RBI regulates its licensing. This organization collects and keeps data on the repayment of loans and credit cards by individuals and businesses. They are used to establish a CIBIL score check free based on the customer’s interactions with various financial institutions.
It is a crucial tool for any lender to assess a borrower’s creditworthiness and net worth to choose whether or not to grant more loans to them based on their credit history. Therefore, banks and other lending institutions provide all credit-related information to the Credit Information Bureau of India Limited (CIBIL), which assesses debt repayment progress and prepares and publishes Credit Information Reports (CIR) or the CIBIL report, which exhibits the lender’s financial worthiness.
The Reserve Bank of India licenses all credit agencies to calculate credit scores. The CIBIL score is the most widely used and recommended credit score by banks and other financial institutions. The CIBIL score differs from a credit score in that a credit score can be obtained from any credit agency, whereas a CIBIL score can only be obtained from CIBIL.
How is the CIBIL Score Calculated?
A CIBIL Score is calculated using a combination of the following factors:-
The Borrower’s Credit Repayment History
It examines the borrower’s repayment record. Payment history is one of the most important criteria that might have a good or negative impact on your CIBIL score. For example, your credit score will improve if you pay your credit card bills and loan EMIs on time. And if you make late or missed payments, your credit score will suffer. You can conduct CIBIL score checks online regularly to keep track of your report.
Total Amount Due and Duration
The CIBIL score is determined by the amount borrowed and the length of the loan.
The type of credit: When determining your CIBIL score, the sort of credit you have is also considered. It’s critical to maintain a good balance of secured and unsecured loans, such as mortgages, auto loans, or credit cards. When you have both secured and unsecured credit on your credit report, it means you’ve dealt with both sorts of credit before.
Credit Utilization Ratio
The eventual credit utilization ratios are just as essential as the type of credit or the length of credit. It calculates how much credit you’ve used out of the total credit you’ve been given. The lower you use your sanctioned credit, the better your usage ratio will be.
How can I improve my CIBIL Score?
Always Pay on Time
You should pay all of your credit card bills and EMIs on schedule. Late payments have the greatest impact on your CIBIL score.
Borrow Only What you Can Afford to Repay
Just because it’s easier to acquire a loan nowadays doesn’t mean it’s a smart idea to accumulate massive debts. You must be aware of your ability to repay the debt and take the loan properly. The sooner and more regularly you repay the loan, the higher your CIBIL score will improve.
Establish an Excellent Credit History with a Credit Card
Because credit cards offer no-interest financing, utilizing them regularly and paying your payments on time can help. When you need a loan, the lender should assess your consistent repayment behaviour and offer you a loan.
Review Your CIBIL Report
It is critical to CIBIL score check online and ensure that your CIBIL score report has accurate information regularly. If there is a discrepancy, it should be brought to the authority’s attention as soon as possible.
Make Good Use of your Credit Usage Ratio
Keep your credit card utilization modest and never go over your credit limit. You can also ask to have your credit limit increased if you are a frequent spender. It is not a good idea to use your credit card for more than 30% of the authorized amount.
Don’t Cancel Good Credit Cards
Your CIBIL score will improve if you have a long credit history. As a result, if you have old credit cards with a strong credit history, you should keep them open. You lose good credit history when you close your credit cards, which can hurt your CIBIL score. Therefore, it is recommended that you keep your credit cards active for as long as possible to preserve a good CIBIL score.
Limit Use of Unsecured Loans
Secured loans, such as home loans and car loans, are secured by assets. Personal loans and credit cards are examples of unsecured loans because they are not secured by collateral. As a result, financial organizations may view you as a risky borrower if you have a greater proportion of unsecured loans on your credit report.
To Sum Up CIBIL Score Check Online
There has been a considerable change in the credit policy of financial institutions in India with the introduction of credit rating agencies. People gain from conducting a CIBIL Score check free since they can learn about their creditworthiness before applying for a loan. In addition, financial organizations can verify with whom they may engage in a contract that they will be able to repay. CIBIL is a useful tool for individuals, allowing them to check their CIBIL score online and become familiar with the benefits of a good CIBIL score.
FAQ
Is it possible to get a loan if I have no or a low CIBIL score?
Yes, it’s possible. You can acquire loans from the bank even if you don’t have a CIBIL score or a credit history if you have a salary account with them.
Is it true that cancelling my bank account has an impact on my CIBIL score?
NO, closing your bank account will have no impact on your CIBIL score. Your credit history determines your CIBIL score. Any type of bank account (savings/current) does not provide information about your credit history or debt management, thereby excluding it from influencing your CIBIL score.
When do the CIBIL scores get updated?
Credit institutions provide information to CIBIL every 30-45 days, so if you check your score or report within 45 days of closing or paying off your debts, it may not appear in the CIBIL reports. In the event of any mistakes, errors, or disagreements, CIBIL will contact the credit institutions. Your CIBIL score will be revised within 24 hours based on the information provided by them.
I want to raise my CIBIL score without having to take out any bank loans. Is it achievable?
Yes, you can significantly enhance your CIBIL score without taking out a bank loan. The single factor that determines your CIBIL score is your repayment history.
It can be done in two ways. First, while paying your credit card payments, you can keep a decent repayment track. The second option will present itself if you do not have a credit card due to a lack of credit history. In this instance, a secured credit card secured by a bank deposit is an option. By paying your credit card payments on time, you can improve your CIBIL score.
Is it true that credit inquiries lower my CIBIL score?
Only a hard query has an impact on your CIBIL score. Your credit report can be queried in two ways: Hard inquiry and Soft inquiry.
When banks or lending organizations search up your CIBIL record to assess your creditworthiness when you ask for any type of credit facility, this is referred to as a hard inquiry. A hard inquiry appears on your credit report. It indicates that you are actively seeking credit in the form of a mortgage, personal loan, automobile loan, credit card, or other kinds of credit. This is why it’s best not to submit too many loan requests to several banks at once, as many loan applications result in many loan requests, which will lower your CIBIL score.
A soft inquiry occurs when you seek your own credit report and credit score. Inquiries related to pre-approved credit card offers, business credit applications, and background checks are part of soft enquires. A routine credit evaluation by a company with which you have an account falls under the category of soft credit pulls. A lender may increase your credit score as a result of a normal assessment.
Why should I give out my credit card or loan account information?
CIBIL verifies your identity by asking questions about your credit history and activity. This mechanism is used to prevent unauthorized access to an individual account and aid in developing a secure system.
Does Cheque Bounce Have an Impact on Your CIBIL Score?
It’s worth mentioning that your CIBIL score primarily cares about on-time payments. Therefore a bounced check has an indirect impact on your credit score. This basically means that if you pay your due instalment or bill on time despite a bounced check, your credit score will not be damaged because your ability to repay will not be harmed. Furthermore, paying on time prevents you from incurring extra penalties and fees.
However, if your check bounces and you are unable to pay within the specified time frame, not only will your CIBIL score plummet, but you may also face criminal charges under different criminal statutes as well as Section 138 of the Negotiable Instruments Act.
