What Determines your CIBIL Score and how to Check it Before you Apply for a Loan?

Your CIBIL score plays an important role during your loan application process, as lenders check it to see if you’re eligible for a loan. Your CIBIL score, which is also known as your credit score, can also determine the loan amount you receive and has an impact on the loan’s interest rate too. While this score is necessary for all credit activities, it is essential when it comes to how easily and affordably can you access collateral-free loans like personal loans. That is why, you may often come across financial advisors who ask you to improve CIBIL score before you apply for a loan. So, it is in your best interest to check your score yourself. You can visit the official CIBIL website and login to create an account and then view your CIBIL score and report for free once. You can also opt for a subscription pack if you wish to check your score more than once in intervals of time. Some lenders let you check CIBIL score without login for free and even show some customized loan offers for you. 

Here’s all you need to know about what your CIBIL score is and the factors that determine it.

What is a CIBIL score?

Your CIBIL score is your credit score, a three digit number that indicates your creditworthiness, which is based on your credit history and repayment behaviour. TransUnion CIBIL Limited is a credit information company, who assigns a credit score known as a CIBIL score based on the information it gets from various financial institutions. This is one of the most popular credit scores in India. 

What is an ideal CIBIL score?

A CIBIL score ranges between 300 and 900 and the higher your score, the higher are your chances of getting an approval on your loan application. What’s more, a higher CIBIL score can also help you get a larger loan amount and a more nominal interest rate. Usually lenders consider a CIBIL score of 750 and above a good score. This score can help you get a quick personal loan with ease, once you meet your lender’s other loan eligibility criteria. 

What determines a CIBIL score?

Given its importance, knowing what affects your CIBIL score can help you build a high score and get access to needed financing conveniently. Here are the 5 factors that determine it. 

Your payment history 

One of the most important facets of your CIBIL score, your payment history refers to how reliable you have been with paying your loan EMIs or credit card bills. While being timely with these payments boosts your credit score, being late or consistently tardy pulls your credit score down. 

Your credit utilisation 

Another essential factor that affects your credit score is how much available credit you have currently utilised. This speaks to how responsibly you use credit, so if you have used your credit card to its maximum limit quite often or have an entire loan or multiple loans to repay, your credit utilisation ratio will be high and thus, your CIBIL score will decline. When you keep your utilisation low, your score is high. 

Your credit mix

Your credit history also affects your CIBIL score in the sense of how much experience you have had in dealing with various types of credit. Having both secured loans like a home loan or a car loan as well as unsecured loan like a personal loan or a credit card in your history helps drive up your credit score. Thus, aim to have a good mix of credit to boost your score. 

Your credit applications

Your CIBIL score is also affected by how many loan or credit card applications you have made in the recent past. Making too many can indicate that you are credit-hungry and thus lowers your score. It also means that you may have received a number of approval from various lenders, which can increase your debt and thus negatively impact your score. 

Your other credit-related activities 

Other actions that you undertake regarding credit can also impact your CIBIL score such as asking for an increase in your credit card’s credit limit or standing as a guarantor for a loan for a member of your family or a friend. While the former affects your credit utilisation, the latter only affects your credit score if the borrower whom you are a guarantor for delays personal loan EMI payments or defaults on the loan. So, undertake all credit-related activities with care to have a high CIBIL score. 

How to improve CIBIL score?

Now that you know the factors and actions that affect your CIBIL score, here are various measures you can employ to improve CIBIL score. 

  • Make EMI payments on time and pay your credit card bills in a disciplined manner 
  • Watch over how much credit you utilise at any given point and keep it low 
  • Plan your spends and expenses based on your income and repayment ability 
  • Watch over how much new credit you apply for, especially over a short span of time
  • Become a guarantor or co-signer on a loan for someone else with care
  • Check your CIBIL score and report routinely to stay informed

With this information in hand, it’s time for you to check CIBIL score without login via Bajaj Finserv and find out more about the Bajaj Finserv Personal Loan that offers you fast and collateral-free financing of up to Rs.25 lakh. To see your customised deal and get instant approval, check your pre-approved offer here!