A CIBIL Credit report consists of all the particulars related to your borrowing history and the discipline of its repayment. Your CIBIL Score indicates financial stability and helps the lenders in deciding if lending to you is worth taking a risk or not. Simply speaking, CIBIL Score explains the probability of a borrower paying back the loan that was taken.
HOW ARE CIBIL SCORE CALCULATED?
CIBIL Scores are calculated based on various factors such as one’s payment history, number and type of loan accounts, length of one’s credit history. Once the CIBIL Score is calculated, it is sent to the banks and financial institutions for evaluation. Each bank or credit institution has its own benchmark that constitutes as a good score. It differs across banks.
WHY ARE CIBIL SCORE IMPORTANT?
CIBIL Scores are very important when it comes to availing credit, especially loan approvals. The banks check your CIBIL Score or credit score through CIBIL. A CIBIL score helps determine your creditworthiness which in turn will help you avail loans faster and easier.
When a borrower applies for a loan or a credit card at a bank or a financial institution, the lender checks the credit or the CIBIL Score first to determine if the applicant is eligible to avail the loan. The lender will not consider or reject an application if the CIBIL Score doesn’t meet their expectations or if its too low. But if the credit score is high, the lender will consider the application and move on to evaluate other factors before approving the application. Your CIBIL Score acts as the first impression for the lender. The higher the score, the better chances of the loan/ credit card being approved.
WHY IS CIBIL REPORT IMPORTANT?
A CIBIL report plays a prominent role in an individual’s financial journey. The lenders depend on your CIBIL report to verify an individual’s creditworthiness. The main purpose of a CIBIL Report is that it aids the lender as well as the borrower in identifying and understanding their credit history clearly and completely.
Purpose of a CIBIL Report :- A CIBIL Report helps to measure the ability of a borrower to repay the loan. The lenders refer the report and measure how much loan an individual currently has and if any loan can be taken further.
Most Important things you should know about CIBIL Report:
Decides the credibility: CIBIL Report describes the credibility of an individual. If you are an individual, who has managed to repay all the loans on time, you will have a good credit report.
Maintains a Monthly Record: CIBIL Report is based is based on the month on month details about the type of loans and the number of loans taken by an individual. It provides the entire credit related information of an individual.
Helps for Further Improvement: The CIBIL Report facilitates an individual to analyze the complete credit history and understand the scope of improvement in different areas.
Main component of CIBIL Report: A CIBIL Report essentially depicts the payment history of the loans belonging to an individual. It basically displays the exact portion of loan an individual has cleared and the current debt status of the individual.
ADVANTAGES OF GOOD CIBIL SCORE:
1. Ability to get a line of credit easily.
2. Quick approval for mortgages.
3. Low interest credit card rates.
4. No security deposit on cell phones.
5. More negotiating power.
6. Get approved for higher limits.
7. Low interest rate home loans and car loans.
CONCLUSION:
The loan market has well transformed in the last five years with the availability of individual credit information through CIBIL Report. Generally, the lenders look at CIBIL Report before deciding on a loan. If you have applied for a loan, you should know the important points that are related to the CIBIL Report.
